(Corrects headline and first sentence to reflect that company expects 2020 earnings to increase slightly, not decline; corrects forecast given recently to $7.56 billion instead of $7.8 billion, paragraph 3; corrects timing and details of company's previous estimates, paragraph 4)
HOUSTON, Dec 5 (Reuters) - U.S. pipeline operator Kinder Morgan Inc on Thursday said it expects core earnings to increase slightly next year and signaled it would move to cut its debt load and increase its dividend.
Investors this year have pushed U.S. oil and gas pipeline companies to improve their financial health and deliver positive free cash flow. Low energy prices have pressured pipeline earnings and some projects have stalled as U.S. shale drillers idled rigs.
Kinder Morgan said it expected adjusted pre-tax earnings of $7.6 billion next year, in line with Wall Street estimates but slightly up from a recent forecast of $7.56 billion in the third quarter.
At the end of 2018, the company had forecast adjusted pre-tax earnings of $7.8 billion, but lowered estimates by about 3% in the third quarter because of a delay in the commercial start up of its liquefied natural gas (LNG) export facility at Elba Island, lower commodity prices and other factors.
The company plans to spend $2.4 billion on expansion projects and joint ventures next year, down from $3.1 billion last year but still above estimates.
Kinder Morgan expected to generate $5.1 billion of distributable cash flow in 2020, about 3% higher than the current forecast for 2019.
Chief Executive Steve Kean pointed to new projects coming online, lower interest expense and improved realized prices in its CO2 business, though he said the growth was partially offset by lower re-contracting rates on some natural gas pipeline assets and crude and condensate assets.
The company said it plans to increase its dividend to $1.25 per share, annualized, next year, and expects to use internally generated cash flow to fully fund the dividend. The 2020 dividend would be up 25% from last year, the company said.
It expects to reduce the ratio of debt to adjusted pre-tax earnings to 4.3 next year, compared with an anticipated 4.4 by year end and 4.7 in the third quarter. It will use proceeds from asset sales, including the sale of the U.S. portion of its Cochin pipeline and its Canadian unit, to pay down debt.
The moves would give Kinder Morgan the financial flexibility to either repurchase shares or invest in attractive projects, providing an estimated $1.2 billion, the company said.
"We think that building this financial flexibility into our 2020 budget is the right decision for our shareholders," Kean said.
Kinder Morgan shares have risen 25% for the year to $19.30 but are down 6.4% so far in the fourth quarter. (Reporting by Collin Eaton in Houston and Arunima Kumar in Bengaluru; Editing by Marguerita Choy and Steve Orlofsky)