Kinder Morgan (KMI) Q2 2025 Earnings Call Transcript

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DATE

• Wednesday, July 16, 2025, at 4:30 p.m. EDT

CALL PARTICIPANTS

• Executive Chairman — Richard Kinder
• Chief Executive Officer — Kimberly Allen Dang
• President, Natural Gas Pipelines — Tom Martin
• President, Natural Gas Pipelines (East Region) — Sital Mody
• Chief Financial Officer — David Michels

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TAKEAWAYS

• Adjusted EBITDA Growth: Adjusted EBITDA increased by 6%, with expansion projects and the Outrigger acquisition cited as contributing factors.
• Adjusted EPS Performance: Adjusted EPS rose 13%, driven by both expansion projects and the Outrigger acquisition.
• Net Income: Net income attributable to the company was $715 million, up 24% compared to Q2 2024, with a portion from favorable hedge mark-to-market recognized.
• Adjusted Net Income and EPS: Adjusted net income was $619 million and adjusted EPS was $0.28, both up 13% from last year.
• Quarterly Dividend: $0.2925 per share dividend declared, $1.17 per share annualized, representing a 2% increase from 2024.
• Backlog Expansion: Project backlog increased from $8.8 billion to $9.3 billion, with $1.3 billion in new projects added and $750 million placed in service.
• Capital Allocation: $500 million of CapEx approved for Kinderhawk, underpinned by life of lease contracts; approximately 50% of the backlog targets power demand projects.
• Natural Gas Transport Volumes: Transport volumes increased 3% versus Q2 2024, primarily due to LNG deliveries and new contracts.
• Natural Gas Gathering Volumes: Gathering volumes declined 6% year over year and 1% sequentially, attributed to producer ramp-up timing and prior price weakness. Full-year volumes are expected to average 3% above 2024 but 3% below budget.
• Refined Products and Crude/Condensate Volumes: Both refined products and crude/condensate volumes increased 2% compared to Q2 2024. Full-year refined products volumes are forecasted to be 2% higher than 2024 and flat to budget.
• Terminals Utilization: Liquids lease capacity was 94%. The Jones Act tanker fleet is fully leased through 2025 and at least 97% leased through 2027.
• NGL and CO2 Volumes: NGL volumes up 3% versus Q2 2024; CO2 volumes down 8% versus Q2 2024; oil volumes forecasted to be 4% below 2024 for the full year and 1% below budget.
• Debt Metrics: Net debt ended at $32.3 billion; net debt to adjusted EBITDA was 4.0 times, down from 4.1 times in the prior quarter; anticipated to be 3.9 times at year-end.
• Permitting Developments: Federal permitting environment improved, with a 50% increase in prior notice limit and a one-year waiver of the five-month waiting period for construction after permit issuance.
• Tariff Impact on Projects: Tariffs estimated at roughly 1% of project costs for two-thirds of backlog projects, unchanged from previous estimates; management does not expect a significant impact on project economics.
• Tax Reform Benefits: Management expects significant cash tax benefits in 2026 and 2027, with the company not expected to be a material cash taxpayer until 2028.
• Credit Ratings: Moody's placed the company on positive outlook in June, with a similar S&P outlook earlier; credit spreads have tightened as a result.
• Project Return Multiples: Backlog multiple at 5.6 times, slightly improved from Q1, as placed-in-service projects had lower multiples than new additions.
• LNG Market Share: The company transports about 40% of all feed gas for U.S. LNG liquefaction facilities, as stated on the Q2 2025 earnings call.
• Data Center and Utility Demand: Project activity driven by regulated utility contracts for data center power; behind-the-meter opportunities are being explored.

SUMMARY

Kinder Morgan (NYSE:KMI) management projects U.S. natural gas demand to grow by 20% between now and 2030, citing Woodmac estimates and emphasizing LNG as a driver for both domestic and global expansion opportunities. The project backlog increase was fueled by long-term, contracted projects in Texas and Louisiana targeting LNG and power markets. Permitting improvements, project returns, and expanded federal tax incentives are expected to provide additional tailwinds for capital deployment. Incremental demand is emerging from data centers and regulated utilities, with power market projects now representing approximately 50% of the backlog. Acquisition and expansion activity, notably the Outrigger transaction and Kinderhawk investment, are cited as key drivers of year-to-date and expected full-year financial outperformance.

• Management stated that tariff-related project risk remains limited, with only a 1% cost impact estimated for major projects.
• Liquidity and capital resources remain sound, with internal cash flow supporting a multi-billion dollar project pipeline.
• Credit rating agencies have signaled confidence via positive outlooks and narrowed credit spreads after balance sheet expansion.
• Federal permitting reforms, including increased prior notice limits and NEPA scope changes, are positioned to accelerate timelines for eligible projects, as discussed on the Q2 2025 Kinder Morgan earnings call.

INDUSTRY GLOSSARY

• NEPA: National Environmental Policy Act, U.S. legislation governing environmental reviews for energy and infrastructure projects, often cited in permitting discussions.
• FID: Final Investment Decision, the point at which a project sponsor commits capital and proceeds with construction.
• Take-or-pay contract: A contract obligating the buyer to pay for a minimum volume of product or capacity, regardless of actual usage, enhancing revenue certainty.
• Jones Act tanker: U.S.-flagged vessel compliant with the Merchant Marine Act of 1920, requiring carriage of goods between U.S. ports by U.S.-built and operated ships.
• G&P assets: Gathering and Processing assets, referring to infrastructure that collects and prepares raw natural gas for transport or sale.
• NGL: Natural Gas Liquids, hydrocarbons found in natural gas that are extracted as liquids, including ethane, propane, butane, and natural gasoline.
• LNG: Liquefied Natural Gas, natural gas cooled to a liquid state for ease of storage or transport.
• Outrigger acquisition: Kinder Morgan's recent purchase of Outrigger Energy assets, enhancing gathering and processing capabilities.
• Kinderhawk: Kinder Morgan's gas gathering system focused in the Haynesville shale region.
• Prior notice limit: The maximum project cost under which companies can follow an expedited federal permitting process, raised to $61 million.

Full Conference Call Transcript

In previous quarterly calls, I have emphasized the positive attributes of the natural gas story, concentrating primarily on the rapidly growing demand in America. But as we all know, the gas market is international in nature, and a great deal of the growth potential for US production is driven by that worldwide increase in demand. So I thought today, I would spend a bit of time sharing some thoughts on what's driving that overseas growth. The chief economist of a major oil company recently estimated that global gas demand is expected to increase by 25% over the next twenty-five years, and I do not believe that projection is unreasonable.

It affirms my belief that natural gas will inevitably remain a key source of energy for the long term around the globe. The factors underpinning that growth are pretty easy to understand. Demographers project continued substantial growth in worldwide population over that time period, in the range of 2 billion additions by 2050. A great bulk of that increase will occur in the emerging markets of Asia and Africa, where the need for energy is particularly acute as large portions of the population move into the middle class, which drives additional energy consumption.

Because there is a lack of local production and an inability to access gas by land-based delivery in most of those nations, it will be LNG, which will satisfy the bulk of this additional demand, and I think it will grow faster than the overall demand for natural gas. Now, what's the impact of all this international growth on the US energy segment? I believe that American exports of LNG will play a critical role in supplying this international LNG demand. The US has been the top global producer of natural gas for fifteen consecutive years and the world's top exporter of LNG since 2023.

I believe the U.S. role becomes even more important in light of recent developments in the Middle East. Customers on the receiving end want security of supply without undue worries about disruptions caused by military actions, and this benefits the position of U.S. supply. This makes us confident that a major portion of the LNG required will move through America's rapidly growing liquefaction terminals. Consistent with this view is the recent estimate of S&P Global Commodity Insights that LNG feed gas demand in America will increase by 3.5 BCF a day this summer compared to 2024 and that it will more than double by 2030. That should be a real positive for Kinder Morgan.

As much as we move about 40% of all the feed gas for those facilities, when you add the international LNG growth, the robust need for gas to satisfy US domestic power, and industrial demand, examples of which are reflected in the new expansions that Kim and the team will be discussing on this call, it signals to me that the positive natural gas story has legs and will last for decades to come. With that, I'll turn it over to Kim and the team.

Kimberly Allen Dang: Thanks, Chris. Our financial results for the quarter showed strong growth over the '4 with adjusted EBITDA increasing by 6% and adjusted EPS increasing by 12%. For the year, we currently expect to exceed our original budget, which already reflected very nice growth by at least the contribution from the Outrigger acquisition. It's an amazing time to be in the natural gas industry. This is certainly the best opportunity set I've seen during my twenty-four years in this industry. The underlying market fundamentals are strong with U.S. natural gas demand expected to grow by 20% between now and 2030 by Woodmac estimates. The federal permitting environment has improved. The US Army Corps of Engineers is issuing permits very quickly.

We've seen some recent action, which is helpful, including a 50% increase in the prior notice limit and a one-year waiver of the five-month waiting period between the time before you can start construction. Between the time the permit is issued and you can start construction. So the Supreme Court ruling on NEPA should help narrow the scope of the NEPA reviews and make nuisance lawsuits more difficult. The recent budget reconciliation bill delivers nice tax benefits, including incentives for investment and expanded interest deduction. As a result, we expect significant cash tax benefits in 2026 and 2027 and do not expect Kinder Morgan, Inc. to be a material cash taxpayer until 2028.

The one fly in the ointment is tariffs. However, at this point, we still do not believe that the tariffs will have a significant impact on project economics. For our large projects, MSX, South System four, Trident, GCX, and Bridge, that together comprise almost two-thirds of our backlog, we currently estimate that the impact of tariffs to be roughly 1% of project cost, which has not changed from our estimate last quarter. Our project backlog increased from $8.8 billion to $9.3 billion during the quarter. We added $1.3 billion in new projects and placed approximately $750 million of projects in service.

The projects we added included Trident phase two and the Louisiana line Texas access project, which include moving natural gas from Katy, Texas into the Louisiana LNG market. We also added two NGPL projects to serve power plants. All these projects are underpinned by long-term contracts and have attractive returns. We also approved approximately $500 million of CapEx for Kinderhawk, which is supported by life-of-lease contracts, to accommodate a significant volume ramp-up by our customers. Currently, approximately 50% of the projects in our backlog will serve power demand.

The multiple on the backlog is around 5.6 times, slightly improved from Q1 as the projects we placed in service were at a lower multiple than the projects we placed in the backlog. Overall, despite $6 billion in project additions to our backlog in the past year, we continue to see very nice future investment opportunities. As Tom Martin said to me the other day, we aren't in the first inning anymore, but we aren't anywhere near the seventh inning stretch. Our strategy remains unchanged. We own and operate stable fee-based assets, which are core to the energy infrastructure.

We use our significant cash flow generated by these assets to invest in attractive return projects, and we return money to our shareholders all while maintaining a solid balance sheet. With that, I'll turn it over to Tom.

Tom Martin: Thanks, Kim. Starting with the natural gas business unit, transport volumes were up 3% in the quarter versus the second quarter of 2024, primarily due to LNG deliveries on Tennessee Gas Pipeline as well as new contracts and LNG deliveries on our Texas Intrastate system. Natural gas gathering volumes were down 6% in the quarter '4 across most of our G&P assets, the biggest impact being in our Haynesville system. Sequentially, total gathering volumes were down 1%. Our producer customers are still ramping back up after lower prices in the second half of 2024. For the full year, we expect our gathering volumes to average 3% above 2024, but 3% below our '25 budget.

We anticipate gathering volumes will grow over the balance of the year given the higher price environment than in 2024 and the need for increased production to meet LNG demand growth that is ramping up throughout the remainder of the year. Looking forward, we continue to see significant incremental project opportunities across our natural gas pipeline network to expand our transportation and storage capabilities in support of the growing natural gas market. In our Products Pipeline segment, refined products volumes were up 2% and crude and condensate volumes were also up 2% in the quarter compared to the second quarter of 2024.

For the full year 2025, refined products volumes are forecasted to be approximately 2% higher than in 2024 and flat to our budget. In our Terminals business segment, our liquids lease capacity remains high at 94%. Market conditions continue to remain supportive of strong rates and high utilization at our key hubs at Houston Ship Channel and the New York Harbor. Our Jones Act tanker fleet is fully leased today and through the remainder of 2025, assuming likely options are exercised, the fleet is 100% leased through 2026 and 97% leased through 2027.

We have opportunistically chartered a significant percentage of the fleet at higher market rates and have extended the average length of our firm contract commitments to four years. The 3% higher NGL volumes at 13% and lower CO2 volumes at 8% in the quarter versus the second quarter of 2024. For the full year, oil volumes are forecasted to be 4% below 2024 and 1% below our 2025 budget. With that, I'll turn it over to David.

David Michels: Alright. Thanks, Tom. Okay. So we're declaring a dividend for the quarter of 29.25¢ per share, which is $1.17 per share annualized at 2% up from our 2024 dividend. For the quarter, we generated net income attributable to Kinder Morgan, Inc. of $715 million, which is 24% above the second quarter of 2024. We generated EPS of 32¢, up 6¢ from last year. Some of that benefit was due to favorable mark-to-market on unsettled hedges, which treated certain items. But on an adjusted net income basis, which excludes certain items, we generated $619 million and adjusted EPS of 28¢, up 13% from last year, respectively.

So even excluding the favorable certain items, we still experienced nice double-digit growth from last year. Our growth was driven by greater contributions from our natural gas expansion projects, the Outrigger acquisition, and attractive natural gas capacity sales and other services driven by favorable demand upon us on our assets. We also received greater contributions from our Jones Act tankers. On the balance sheet, we ended the quarter with $32.3 billion of net debt and a 4.0 times net debt to adjusted EBITDA ratio. That 4.0 times is down from 4.1 times from the first quarter, which was right after we closed the acquisition of Outrigger.

We expect to end the year with net debt to adjusted EBITDA that rounds up to 3.9 times. Our net debt has increased by $623 million from the beginning of the year, and here's a high-level reconciliation of that change. We generated cash flow from operations of $2.811 billion for the first two quarters. We paid dividends of $1.3 billion. We've invested total capital of $1.42 billion. The Outrigger acquisition was approximately $3.65 billion, and all of our other items were a use of cash of about $65 million, and that gets you to the $623 million increase for the year. As Kim mentioned, we expect to exceed budget by at least the contributions from the Outrigger acquisition.

Our budgeted 2025 adjusted EBITDA growth from '24 was 4%. Just including the Outrigger acquisition, our EBITDA growth would increase to 5%, and our adjusted EPS growth would remain at an attractive 10% from 2024. Most of our 2025 budgeted growth comes from expansion project contributions, and we remain on target to place those expansion projects in service on time and on budget with only minor variances. The largest expansion contributions come from Evangeline Pass project and our South Texas to Houston project, our Texas intrastate system, both of those are now in service.

So in my final items, in June, Moody's placed our credit rating on positive outlook, and they joined S&P who put us on positive earlier in the year. Our credit spreads have already improved some as a result. So we're off to a good start for the year tracking to beat our budget. We've sanctioned additional attractive projects that will add to our future growth and expect meaningful cash flow benefits from tax reform. I'll turn it back to Kim for Q&A.

Kimberly Allen Dang: K. Michelle, if you'll come back on, and we will take questions.

Operator: Thank you. At this time, if you would like to ask a question, you may press 1. And to withdraw your question, please press 2. One moment please for the first question. Theresa Chen with Barclays. You may go ahead.

Theresa Chen: Good afternoon, and congratulations on the progress in the commercial backlog. Under what seems to be fierce competition, do you think the commercial landscape has changed with these demand tailwinds on a structural basis? And what do you think has allowed Kinder to win many of these projects? And what kind of learnings can you share that might shape your strategy going forward on the heels of these commercial wins?

Kimberly Allen Dang: Okay. A couple of points on that. One, I think, you know, what part of what allows us to be competitive is the existing asset footprint that we have. We've got an outstanding footprint, and so we are very competitive where we can build off of that footprint or and or use the existing footprint to deliver volumes to customers. I'd say, you know, the other things are, I think people trust us to be able to build projects and get them delivered. And so if they've got a significant investment that, you know, they need natural gas delivered, you know, they don't want to be waiting on those molecules.

When they get that project in service, you know, they want to be able to have the supply there. So I think our track record in building and delivering projects is helpful. And then I think the way we operate, you know, and the customer service that we provide, in terms of trying to make sure that if we have maintenance or other items that our customers know well in advance, I'm trying to make sure that we perform that maintenance at times when our customers would be least impacted trying to find times when, you know, our customers, when we can find alternative delivery for them.

So you know, I think that's some of the things that go into the commercial discussions and allow us, you know, allow us to win projects. And I think, you know, you can see from what we've added to the backlog, we've been very successful.

Theresa Chen: Thank you. And looking forward on additional projects to come potentially, the backlog. As far as the expansion westward from the Permian, what is the progress on building additional natural gas infrastructure on that front? And what would something like Copper State Connector amount to in terms of cost economics, as well as the potential for subsequent brownfield expansions down the line?

Kimberly Allen Dang: Okay. Well, let's not get too far ahead of ourselves. You know, on Copper State, there's clearly a need in Arizona. You know, I think the Arizona utilities have need for more natural gas. I think there's the potential for data centers, and we're having conversations on those fronts. Obviously, you know, that would be a large project. There are other Copper State Wood. I mean, there are other smaller projects that we have that we're looking at. But it is a competitive process on Copper State. And, you know, constantly changing tariffs, you know, make things more challenging on these larger projects where we've got to come to agreement with multiple different multiple different shippers.

And then any project that we do on this front, you know, the project's gonna have to meet our return thresholds. And so we're gonna be very disciplined about how we deploy capital on this. Know? But, I mean, a project could be anywhere from $4 to $5 billion-ish.

Theresa Chen: Very helpful. Thank you.

Operator: Thank you. Our next caller is Michael Blum with Wells Fargo. You may go ahead, sir.

Michael Blum: Thanks. Good afternoon, everybody. I had a capital allocation question really between gas pipelines and gathering investments. You talked about this big opportunity set on the gas pipeline side. Your average multiple is, you know, between five and six times. How do we think about a $500 million investment in Kinderhawk? Does that mean this Haynesville investment is generating an even higher return than that given the higher risk profile? Just kinda think through all that.

Kimberly Allen Dang: Okay. Sure. So let me start by saying, no change in the way that we make our investment decisions or in our approach to investment or investment returns. The way we've always done it is, you know, we look at the risk-reward. So you're looking at, you know, on the risk side, you're looking at how stable are the cash flows. And so that gets into okay. Is it a take-or-pay contract? Or is it a life of lease dedication? Does it have, you know, if it's a take-or-pay, is it a five-year contract or is it a twenty-year contract? What's the credit on that?

And so, you know, when you have longer contracts with higher creditworthy partners, and their take-or-pay, then you're within our return threshold range, you're gonna skew to the lower side of that range. And when you have things that have commodity exposure or volume exposure, then you're going to look for a return at the higher end of our target range.

Michael Blum: K. Great. Thanks for that. And then just wanna see an update on how you're thinking about behind-the-meter opportunities. I know you've talked about maybe having something in place with partners where I want to see where that stands and how meaningful a driver of future CapEx that could be. Thanks.

Kimberly Allen Dang: So I think, you know, when we think about where we've seen the most action on the data center front, if you will, is really from regulated utilities. I mean, that's where we're seeing most stuff get done. So, you know, regulated utility is able to put it in their rate base. They're going out there getting a PPA with the data center provider. We have not seen a lot of IPPs that have announced projects at this point in time. But, obviously, we are talking to them, and that is, you know, that's a reasonable possibility because I think if IPPs can get contracts, you know, they'll be able to build as well.

But I'm gonna turn it over to Sital, and he can talk a little bit more about our strategy there.

Sital Mody: Yeah. So, one of the things, you know, as we look at the landscape on data centers, speed to market is key. And so as we look at, you know, opportunity set, as Kim said, our focus has thus far been on the utility side and helping them with their power needs. We are looking at, you know, kind of a broader structure such as, you know, where we've got some key partners that specialize in their respective fields. You know, our expertise lies in bringing supply to the point. We bring storage and then we, you know, we let the other folks do what they do best, including hyperscalers that know how to build data centers.

And so, you know, I think the concept is we are looking at a few key sites in different areas and seeing if we can kind of pull together a bigger, broader project specifically tied to behind the meter.

Operator: Thank you. Our next caller is John McKay with Goldman Sachs. You may go ahead, sir.

John McKay: Hey, everyone. Thank you for the time. I'm gonna pick up on this project thread, of course. Maybe just talk about the backlog on the gas side. You mentioned about 50% power utilities at this point. That's, you know, arguably a larger share than power has in kind of the go-forward gas demand growth we're looking at relative to, you know, LNG, I suppose. Could you just talk a little bit about how you'd expect that fifth percent to kind of trend from here? With incremental projects on the horizon, maybe putting aside Copper State for a second, start leaning more LNG, I mean, we need to wait for more FIDs.

Maybe just frame up, like, how that mix looks over the next couple quarters or years.

Kimberly Allen Dang: Yeah. I mean, I'd say it's hard to project exactly what that mix is gonna look like. Obviously, the biggest driver of demand growth, you know, both in Woodmac projections and in our, you know, internal projections is LNG, and there's a doubling of, you know, expected doubling of LNG. As we've said a number of times, those LNG projects, I mean, generally, when they get sanctioned, there's an original, there's an initial project that is sort of a mainline from the facility to the nearest liquid point, then generally, as they move forward with their development, you know, they're looking to find more competitive supply and diversify supply, and so that leads to additional projects down the line.

One of the things that we've consistently said and that we consistently see is, and this is especially true in the Woodmac numbers, is, you know, we don't think that the Woodmac numbers accurately reflect the growth that we think we're gonna see in power demand. And, you know, that could be a difference between the volumes that they expect to flow and what we expect to sign up in terms of long-term take-or-pay contracts. But the demand, the breadth, and the scope of the power demand is very enormous. And so, I mean, we're seeing power demand in Arkansas, Louisiana, you know, Georgia, South Carolina, Arizona, Wisconsin, I mean, Texas.

And so, I mean, the amount of power demand, I think, and the projects that we're gonna see on that front are, you know, when you look at that relative to the expectations for demand in power, I just think there is an alignment there.

John McKay: That's helpful. That's interesting. And maybe, just for my next question, you touched on the new tax rolls. Should open up some incremental cash flow for you guys. I guess just wondering if you could kind of put a bit of a number around the incremental cash kind of looking forward. And then on a related point, does it change how you think about, you know, your ability to go after projects, your kind of implicit cost of capital, know you're kind of defending the return profile you want to get, but, you know, just an incremental tax frame or change that at all?

David Michels: Hey, John. It's David. For the tax reform benefit, we're not quantifying it anymore specifically than just saying we've got nice benefits from it beginning in 2025. It's not material in 2025 to our forecast, but we'll see some benefits this year because it was retroactive to the beginning of the year. We are seeing substantial benefits in '26 and '27, so as Kim said, we don't expect to be a material federal income taxpayer in either of those years as a result of the tax reform. We see nice benefits thereafter, but we're not quantifying those.

And it also depends a little bit on when we put new projects into service because the full expensing provision is really the biggest piece of the benefit that we're getting from tax reform.

Kimberly Allen Dang: And I would say, you know, having that incremental cash flow doesn't change our investment strategy. So we're not moving our return threshold because we have incremental cash flow available. I think, you know, our view is and continues to be that for good return projects, there's unlimited capital. And we will find a way to finance them. So, you know, obviously, we've got a lot of cash flow available more now than we did before. You know, we've got room on our balance sheet. And, you know, I think with the projects that we're doing, they're attractive projects. And so if we ever needed to, you know, we could bring in outside capital.

Operator: Thank you. Our next caller is Jeremy Tonet with JPMorgan. You may go ahead, sir.

Jeremy Tonet: Hi. Good afternoon.

Kimberly Allen Dang: Good afternoon, Jeremy.

Jeremy Tonet: Want to turn to Arkansas if I could. We've seen recent reports of hyperscaler activity there and want to double-click on your Texas Arkansas power project. Notice the binding open season there. And, you know, given the 400 already prearranged there, it seems like that could support two gigs, you know, very nice size for the project right there. But do you expect more to come along at that point? Do you see the possibility for more demand beyond that, or really you kind of have a fit-for-purpose pipe right here and ready to go? And anything you could provide as far as increment details there would be helpful.

Sital Mody: Yeah. Jeremy, this is Sital. So, I'll backspace on that and tell you that it's, you know, that project is supporting power. But broadly, when you think about, you know, the opportunity set, we are seeing incremental opportunity set not only in Arkansas, Texas, but along that Midwest corridor. We do see incremental demand on the power side. You know, where the utility ultimately uses it. You know, that'll be up to the utility. You know, as we talked about, we're looking at our own behind-the-meter opportunities. And so I think, you know, there is a robust pipeline of opportunities we are trying to pursue. Specifically in Arkansas and really broader across the network.

Kimberly Allen Dang: And I'd say we don't always know if the power is going to a data center or, you know, what exactly is the debt they're using it for. We don't always have clear visibility through, you know, our customer is typically the power.

Jeremy Tonet: It's typically the power plant. Right. Right. Understood. Just the size of it there. It could support some nice power for the utility, not for Kinder. Understood there. But I'll leave that there. And just wondering, you know, post the Georgia Power IRP filing here, does this impact, I think, the opportunity set as you see it in the Southeast? Could there be upside, I guess, to your current expansion plan scope to make those expansions larger?

Sital Mody: Yeah. Look. I mean, you know, as we've alluded to on previous calls, I think there is a broader opportunity set. You know, we're early in our discussions there, but the fundamentals look sound, and the opportunity set looks good. You know, obviously, we're positioned well with the network there, including, you know, the latest set of expansions and, you know, as we alluded to on the last call, I think Rich said, we've got ancillary expansion opportunities to layer on top of that. We will pursue those as they present themselves.

Operator: Thank you. Manav Gupta with UBS. You may go ahead, sir.

Manav Gupta: Good afternoon. It looks like you have increased the size of Trident from 1.5 to 2 BCF. And as I remember, you did this with Mississippi Crossings also. The pipe got announced at 1.5 and got scaled up very quickly to 2.1. So I'm trying to understand it, you know, what's driving this incremental demand. You come in, you announce a project, and very quickly, you're able to size it up. So help us talk through those dynamics a little.

Kimberly Allen Dang: Yeah. I mean, on Trident, there are metal demands associated with LNG. And it was a fairly easy expansion because there, all we needed to do was add some compression. I think when you go to a phase three, then that would require some looping. So that's a, you know, that's a little bit bigger nugget to take on, and so that would require, you know, more volume to do phase three. But, you know, that pipeline is in a great, great location. And, you know, to be able to get, you know, molecules from Texas all the way over into Louisiana is something people have been trying to do for a long time.

And the combination of Trident and KMLA does that.

Sital Mody: Yeah. In terms of the timing piece, Manav, I mean, really, it's when we get the executed contracts to get us the returns that are sufficient. We know we have other customers that are interested. We'll FID the project if it makes sense, and then we continue to try and build upon it. That's been the strategy.

Manav Gupta: Perfect. And it looks like the backlog, you know, also benefits from the NGPL new projects. Can you talk about a little more about these projects? Looks like the power plant-related projects. So if you could help us understand these incremental projects from NGPL that added to the backlog in this quarter. Thank you.

Kimberly Allen Dang: Yeah. They're both power projects to serve power demand. One in Arkansas and one's in Wisconsin. Essentially.

Sital Mody: Yeah. That's probably all we can tell you at this point.

Operator: Thank you. Our next caller is Jean Ann Salisbury with Bank of America. You may go ahead.

Jean Ann Salisbury: Hi. I just wanted to follow-up to Kim's answer to John's question earlier about when LNG projects sign up for their gas pipeline needs vis-a-vis when they get sanctioned. You've obviously had a ton of LNG contracting activity over the last quarter. I think you're probably still to come this sort of large wave of sanctioning. So I guess my question is if you believe that those projects have kind of already signed up for the gas takeaway that they would need or if that's basically coming as they sanction the projects over the next year?

Kimberly Allen Dang: Generally, what we see and Jason will jump in here, is that, you know, when a project gets to get a project FID, you know, they need to get their financing and put their financing in place. And so to put that financing in place, usually, they've got to have a gas supply. And so that's when, you know, the initial project is, I'll call it, you know, from the facility to the nearest liquid point gets sanctioned. And then, generally, what happens after that is as they continue and they're starting to get closer to in service, you know, they decide, okay. And they're thinking about really how am I gonna supply this on a daily basis.

Then they start looking at, okay. That liquid point is very competitively priced. I might wanna get some cheaper molecules and or what happens if a pipe goes down or something, maybe I also need some diversification. So, you know, that happens more over time, you know, between the time, you know, the project gets sanctioned and before it gets put in service.

Rich Kinder: And let me just add to what Kim says. Given the fact that this demand is occurring primarily along the Gulf Coast, where our system is so extensive, this kind of opportunity just lends itself to a structure like we have. I think we cannot overemphasize the benefit that we have from the infrastructure that already exists and the ability to expand it on a reasonable basis.

Jean Ann Salisbury: That's very clear. Thank you. And then as a follow-up, I wanted to ask about some of the dynamics of Permian gas pipelines. We're very tight on egress capacity today, but something like 5 BCFD comes online next year, including your own GCX expansion. And I think there are a few other possible projects out of the Permian that seem to be progressing. So I guess the question is if there's some concern that this could put pressure on rates for Kinder Morgan later in the decade if those initial pipeline contracts begin to roll off. Can you just kind of talk about how you would frame that risk of Permian overbuild?

Kimberly Allen Dang: Sure. So, the contract GCX PHP are two. I think those ten-year contracts expire in '29 and '30. What I would say is given that those were some of the first pipelines built out of the Permian to the Gulf Coast, you know, they have very attractive rates on them. And so it's two things. One is, I think, you know, they are lower rates than where new projects are getting priced. So there's gonna be some of the cheaper transport out of there. And then, you know, the I forgot what second point I was gonna make. But, Sital, go ahead.

Sital Mody: Yeah. So, I mean, what the other thing, you know, as we think about the two pipes that we have, you're talking about kind of recontracting risk, etcetera, those pipelines fit very well in our network. And we have the ability to extract probably, you know, in my view, better value once those, you know, if those aren't recontracted. So, you know, we view that risk as low. When we think about, you know, the next project out of the basin, gonna be very prudent. If, you know, as we think about our focus has shifted to demand pull, you think about the projects that we sanctioned over the last couple of quarters.

So if there is another producer push project, it would obviously have to be very well contracted and for a longer term.

Kimberly Allen Dang: So those, you know, those pipes go into our Texas interest rate system. They feed contracts that we have in the Austin market. We have, you know, end-use demand attached to that, and that's something that we can offer Shepherd and customers that other people can offer. And then the other thing I was gonna say is that, you know, when we run our economics in order to be conservative to make sure we get good returns on these projects, we assume generally, we assume a step down in rates whenever contracts roll. Not saying that's gonna happen here, but that's, you know, that's part of how we make sure that we get the returns we're expecting to get.

Operator: Thank you. Our next caller is Keith Stanley with Wolfe Research. You may go ahead, sir.

Keith Stanley: Hi. Good afternoon. Wanted to start on the $500 million Haynesville gathering project. When would the expansion capacity be in service? And what's the projected timeline for the volume ramp to get to returns? And then relatedly, how do you think, if at all, about potential Haynesville takeaway pipelines given all the Louisiana LNG projects we're seeing and your expanded gathering presence?

Sital Mody: Sure. So your first question, you know, we plan on getting all of our facilities in by the end of the fourth quarter next year. And so we do see volume ramping up along the way. Really, you know, we're adding treating capacity, and we're adding incremental pipe loops just to get unlock some of the hydraulics there. Look. As we think about the outlook in the Haynesville, you know, you've got a very productive basin that's very close to the demand centers that we've been talking about. And so, you know, there's a definite need to get incremental molecules to those consuming base the consuming customers. Right? We gotta get the physical molecule there.

As far as the build-out, the existing build-out that's there, given the growth that we see on the Gulf Coast, I think all that does is creates incremental opportunities for us and our both our interstate and intrastate networks. To be able to connect the dots. Know, you've got a lot of convergence at Gillis right now. We're exploring opportunities downstream of Gillis to connect the market to that supply. That's aggregating at Gillis. And if there's an opportunity, you know, we could even consider tying in some of that Kinderhawk production on another takeaway project out of the basin. Once again, all of that's gotta be contracted for, and it's gotta make economic sense.

Keith Stanley: Great. Thanks for that. Second one, wanted to follow-up on some of your opening comments, Kim, on the permitting improvement and the order 871, and not longer having to wait the five-month waiting period before starting construction. When you think in aggregate about those improvements that you're seeing, could this meaningfully accelerate the timeline on some of your larger projects versus original expectations?

Kimberly Allen Dang: So the answer is it depends. So this is a one on 871, it is a it's one year, but they've got it out for notice and comment. And I think, you know, our expectation is that they likely make this permanent, but we'll just have to wait and see. And so right now, with respect to the one-year extension, you know, not a lot of benefit for us. But, if they make it permanent, then yes. There will be benefits to our major projects. And, you know, and so it's gonna depend. And the reason it depends is, you know, it depends on the procurement schedule. And so when we get the pipe and when we get the compressions.

So there are certain projects that we will be able to move up by that five months and take advantage of, and there are others that we won't. The other thing I'd say is on the prior notice. That's, that is increased by 50%, so now it's $61 million. That means you don't have to file for a 7c for projects that are less than $61 million, so the permitting process is much quicker. And so we will definitely benefit from that increase in the prior notice limit. The other thing I'd say on the bigger projects is we've actually filed for a waiver for $871. So we're not waiting on the notice and comment period to be complete.

We've asked them to decide independently on our big projects, DALL System four and MSX. And I think we view the likely outcome of that favorably at this point.

Operator: Thank you. Our next caller is Zack Van Everen with TPH. You may go ahead, sir.

Zack Van Everen: Hi, guys. Thanks for taking my question. Just going back to the Haynesville expansion real quick. Can you guys speak to the volume or capacity that you're adding there? And then is this mainly from your larger customers? Are you seeing demand from some of the privates that feed your system as well?

Kimberly Allen Dang: It's both. So it's from the larger customers, and it's from the privates. And, you know, somebody may be able to speak to the capacity. But, I mean, they are ramping up significantly. You know, if you look at our supply numbers, and, Tom, help me with this because you talked to the board about this today. But we are expecting, Woodmac is expecting a doubling in the production coming out of the Haynesville. So, I mean, it's increasing by, I don't know, from 13 to 26. 26. Yeah. To 26 by 2034. So, I mean, that gives you a sense of the type of volumes that we are talking about.

Zack Van Everen: Gotcha. That makes sense. And then maybe one on the LNG side. I know Tennessee Gas feeds the Plaquemines facility and BG continues to talk about potential further expansion at that site. If they were to do that, does Tennessee Gas have the ability to expand more to feed LNG in that area?

Sital Mody: So first, if they were to do that, I think it further creates opportunities for us, you know, with these projects that we're bringing across. I think, ultimately, it could it would, you know, Tennessee is already full in multiple directions, but we've got, you know, the bottleneck debottlenecking capability as we bring this incremental, you know, we talk about supply from west to east that I've been talking about on the last few calls. Texas access project, which is kind of, you know, continuing on the theme. We talked about Trident, then we talked about the header. And now we're actually extending into Texas to take volumes across to Louisiana. That helps debottleneck.

And so if Plaquemines were to, you know, further expand, we would look at opportunities to bring incremental gas to the basin to that area from not only MSX but some of our other from some of the other pipes in the area, including potentially looking at accessing the Haynesville in a different direction. Right? And so, you know, when we talk about Gillis and kind of the directions that these pipes may head, one of those may be going that further eastward direction to kind of help fill that incremental need.

Operator: Thank you. Our next caller is Jason Gabelman with TD Cowen. You may go ahead, sir.

Jason Gabelman: Yeah. Hey. Good afternoon. Thanks for taking my questions. The first one I wanted to ask was on the Bakken given, you know, the Outrigger deal has been closed for quite some time. I think you're or at least six months, and Double H is close to ramping up here on the conversion. So, just wondering what the strategy is on gaining volumes there and kind of securing potentially higher rates that region has to offer versus other basins?

Sital Mody: I'll take that. So, one, the integration, as we talked about, is going well. We're looking at, you know, incremental networking, you know, networking bottlenecks to be able to gain further efficiencies out in the basin. But as far as it goes, as far as Highland Express goes, you know, we just continue to work with our customers there. I don't have any to report on that. We're making progress. But nothing for this call.

Jason Gabelman: Okay. And then just maybe a longer-term question. You've talked a lot about the LNG growth on the US Gulf Coast and the boon it's been for your business. There is some concern that after this wave of capacity, there could be a potential oversupply in the market. And I wonder if you're in your conversations with LNG customers, hearing anything around a potential slowdown in contracting or need for additional piping into future plants after this wave of capacity comes online, or if your LNG customers really expect new builds to continue at pace through the decade and into the 2030s.

Kimberly Allen Dang: I mean, from my perspective, I mean, we're not seeing, and you can see this from what, you know, the LNG builders are announcing, which is they continue to announce new projects and sign new contracts. And we continue to see projects get announced and projects get expanded. And I think part of the reason that you see that is it is a favorable environment right now to get projects built in the US, number one. Number two, I think that, you know, from a trade negotiation standpoint, it helps on the balance of payments and the whole tariff discussion to take gas from the U.S.

So, I mean, to date, we have not seen any slowdown in our discussions with these customers.

Rich Kinder: Tom, you might share your model that you showed the board today, in terms of overall growth and worldwide demand and the U.S. portion of it.

Tom Martin: Sure. I mean, as Rich alluded to in his comments, you know, world demand is expected to grow by 25% between now and 2050, and much of that growth, like, actually more than 25% will be filled in our view and I think in the view from others in the market with LNG. Most of that growth, as Rich said, is in, you know, Asia, you know, basically areas where they don't have production. So it's gonna have to be LNG that ultimately fills that hole. And, you know, what we've seen so far is that the US, while the overall demand profile is growing, the US market share is growing as well.

So it's almost a doubling effect of the benefits of having LNG infrastructure growing in the US. And I think that's for a few reasons. One, you know, the rule of law here in the US as compared to other places around the world. There's a very, you know, advanced network within the US. Such that if there's ever a need to, you know, leave molecules back in the US, and optimize those from a world price environment versus a domestic US environment. We have a great network of infrastructure here in the US to support that. And then I think, you know, the track record.

I mean, I think the developers in the US have done an extremely good job of being successful in getting projects online timely and providing competitive rates, and we have a tremendous supply in the US that I think gives customers internationally a lot of comfort in knowing that there's gonna be plenty of molecules behind these twenty-year contracts that they signed with US developers and with customer midstream companies like us. So I think the US is in a great place to continue to grow well in north of what the overall global gas demand growth is of between now and 2050.

So I think that means more to come beyond what we see in the media, you know, line of sight of projects.

Operator: Thank you. Our next caller is Brandon Bigham with Scotiabank. You may go ahead, sir.

Brandon Bigham: Hi. Thanks for taking the questions. Just continuing on the LNG theme here. Could you maybe discuss some of the incremental opportunities you see maybe outside the Haynesville? And concurrently, which basin or basins do you expect to be sort of next on deck to meet all of that growth that you guys have been talking about?

Sital Mody: Yeah. Sure. So outside of the Haynesville, you know, we've talked about this before. The Lean Eagle Ford is gonna be important. You know, one of the key themes that's kind of coming to surface is low nitrate, you know, the nitrogen quality of the gas. And, you know, as you think about LNG plant efficiencies, you know, lower nitrogen equates to better production. So we think the Lean Eagle Ford is gonna come into play, especially as it pertains to some of the Texas LNG facilities. Obviously, you've got the Permian.

You know, when we think about the Utica and the Marcellus, you know, given the constrained nature of the basin, it's gonna be hard to get extra capacity out of there. That being said, we are evaluating some opportunities to move incremental gas out of the Utica down south using our Tennessee network. And so, you know, that's in its early phases. You know, it's gonna take an all of the above approach because it's not just the LNG folks that are looking for molecules. It's the power demand that we just talked about, and it's also the existing organic LDC and the basic power that we've been talking about, you know, since January of 2024.

All of that's gonna be growing and needing access to molecules. So it's an all-of-the-above basin approach. You know, we've even talked about our Bakken egress project on the residue side, moving gas out west. I mean, that's another example of something that's gonna come into play as this demand kind of matures.

Brandon Bigham: Okay. Great. And then maybe just on the budget full-year budget commentary regarding the EBITDA. Reiterating the commentary there about exceeding by at least the Outrigger contribution. Could you discuss some of the areas you see outperforming expectations in 2H that sort of offset some of the lighter performance we've seen through 1H to kind of meet that expectation?

David Michels: The outperformance in the second half of the year consistent with what we've seen in the first half of the year, really, natural gas capacity sales, the Outrigger acquisition contributions, parking loan services on our natural gas business, the Jones Act tanker contributions, those are all some of the items that are contributing to the half outperformance, and those are consistent with what we've seen in the first half. I would say there was a little bit of timing between the first quarter and the second quarter. We didn't see some of that show up in the first quarter, but on offer.

Kimberly Allen Dang: On Outrigger, particularly, and some of the PALS performance as well.

Operator: Thank you. Harry Mateer with Barclays. You may go ahead, sir.

Harry Mateer: Hi. Good afternoon. David, earlier, you made the point that most of the expected reconciliation bill benefits come from the treatment on depreciation, which, you know, I think makes sense as it doesn't look like the 30% of EBIT deductibility for interest was a material constraint for Kinder Morgan, Inc. But having said that, does the expanded interest deductibility cause you to rethink anything on the financing or balance sheet side moving forward to take greater advantage of those tax benefits on interest expense down the road?

David Michels: No. It really does it's a good question, but no, it really doesn't. I think our financing strategy is pretty straightforward and simple. It's pretty plain vanilla, and, you know, we don't have a ton of external capital needs to fund our growth projects. We can fund, you know, and a half billion dollars internally from cash flow that we generate. As that EBITDA continues to grow, that will continue to grow. And so we really just use our external financing strategy to refinance our maturing bonds. And but they're in this tax reform won't influence that. In our view.

Harry Mateer: Got it. Alright. Thank you.

Operator: Thank you. At this time, I am showing no further questions. I'll turn the call back over to you for any closing comments. Thank you.

Kimberly Allen Dang: Thank you very much. Have a good evening.

Operator: Thank you. This concludes today's conference call. You may go ahead and disconnect at this time.

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