Kinder Morgan: Were EPS and Earnings Beat a Surprise for 1Q16?
Kinder Morgan Posts 1Q16 Earnings, Lowers Guidance
Kinder Morgan’s earnings per share
Kinder Morgan (KMI) reported its 1Q16 earnings on April 20, 2016. Its 1Q16 actual EPS (earnings per share) fell to $0.12 from $0.20 in 1Q15. The YoY (year-over-year) decline in EPS was mainly due to lower net income driven by higher DD&A (depletion, depreciation, and amortization) expense, impairments and disposals of long-lived assets, and operating expenses. This was offset by lower interest and general and administrative expenses.
KMI pays a considerable amount of its earnings as interest expense due to its huge outstanding debt. KMI’s net debt was $41.5 billion at the end of the first quarter.
Despite a decline in EPS, Kinder Morgan managed to beat its 1Q16 earnings estimate. For 1Q16, consensus EPS estimate was $0.19, while analyst adjusted EPS stood at $0.20, a beat of 7.0%.
Kinder Morgan’s total EBDA
Kinder Morgan’s total EBDA (earnings before depreciation and amortization), before certain items not controllable by its business segments, increased to $1.94 billion in 1Q16 from $1.91 billion in 1Q15. That’s a YoY increase of 1.5%. The increase was mainly driven by an increase in KMI’s Natural Gas Pipelines and Product Pipelines segments.
Natural Gas Pipelines: The segment’s performance was driven by strong performance on the Tennessee Gas Pipeline and contributions from the Hiland acquisition completed last year. However, the segment’s performance was negatively impacted by a decline in natural gas production along the Eagle Ford and Rockies. Western Gas Partners (WES), Crestwood Equity Partners (CEQP), and DCP Midstream Partners (DPM) are also negatively impacted by a decline in Eagle Ford production.
Product Pipelines: KMI’s Product Pipelines segment benefited from higher volumes along the Kinder Morgan Crude and Condensate Pipeline, recent acquisitions, and projects placed into service.
Terminals: Strong liquids throughput volumes continue to drive the performance of the Terminal segment. However, the bankruptcy of KMI’s coal customers is impacting the segment’s bulk dry tonnage.
CO2: KMI’s CO2 segment saw a 20.6% decline in segment EBDA due to the decline in crude oil prices.
Kinder Morgan’s distributable cash flows
KMI’s 1Q16 distributable cash flows before certain items was $1.23 billion versus $1.24 billion in 1Q15, a marginal YoY decline of 0.1%. KMI’s excess cash after distributions stood at $954 million at the end of 1Q16. KMI forms 2.5% of the iShares North American Natural Resources ETF (IGE).
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