Kinder Morgan, Inc. KMI reported second-quarter 2020 adjusted earnings per share of 17 cents, missing the Zacks Consensus Estimate by a penny. The bottom line also declined from the year-ago quarter’s 22 cents.
Moreover, total revenues declined to $2,560 million from $3,214 million in the prior-year quarter and missed the Zacks Consensus Estimate of $2,907 million.
Lower contributions from the Tennessee gas pipeline and a plunge in demand for refined product primarily led to the weak quarterly results.
Kinder Morgan, Inc. Price, Consensus and EPS Surprise
Kinder Morgan, Inc. price-consensus-eps-surprise-chart | Kinder Morgan, Inc. Quote
Natural Gas Pipelines: Adjusted earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments (EBDA), in the June quarter of 2020 were down 5% to $1,016 million from $1,071 million a year ago. Lower contributions from the Tennessee gas pipeline primarily hurt the segment. Contributions also declined because of several gathering and processing assets since the production of natural gas took a hit in the quarter. The negatives were however partially countered by increased activities from projects comprising the Gulf Coast Express and Elba Liquefaction.
Products Pipelines: The segment’s adjusted EBDA in the second quarter was $227 million, reflecting a decline of 26% from $307 million a year ago. The decline in transported volumes of crude and condensate affected the performance. A plunge in demand for refined product was also responsible for the underperformance.
Terminals: Through this segment, Kinder Morgan generated quarterly adjusted EBDA of $229 million, down 21% from the year-ago period due to divestment of interests in Kinder Morgan Canada Limited last December. Lower demand for terminal assets owing to the pandemic also led to the dismal performance.
CO2: The segment’s EBDA declined 15% to $156 million from $184 million a year ago due to a drop in NGL prices and crude volumes.
Expenses related to operations and maintenance totaled $606 million, down from $646 million a year ago. However, total operating costs increased to $2,842 million in the second quarter from $2,241 million in the corresponding period of 2019.
Quarterly operating loss amounted to $282 million against year-ago quarter’s profits of $973 million.
DCF & Backlog
The company’s second-quarter distributable cash flow declined to $1,001 million from $1,128 million a year ago.
It recorded project backlog of $2.9 billion, as of the June quarter of 2020.
As of Jun 30, 2020, Kinder Morgan reported $526 million in cash and cash equivalents. The company’s long-term debt amounted to $29,976 million at quarter-end. Total debt-to-capitalization ratio at the end of the second quarter was 50.7%.
Despite the coronavirus-induced depressed commodity pricing scenario, the company continues to rely on its strong business model to raise annualized dividend payments to $1.25 per share. The midstream energy player, will however, consider the overall economic scenario while remaining committed to returning cash to stockholders and maintaining a strong balance sheet.
Kinder Morgan projects 2020 DCF to be lower by a little more than 10% from the initial guidance of $5.1 billion, thanks to dented energy demand and low commodity prices owing to the pandemic. The virus outbreak also compelled the company to anticipate a decline in adjusted EBITDA for 2020 of a little more than 8% from the initial guidance of $7.6 billion.
The company has lowered its 2020 sustaining capital and expenses by a total of $170 million. The midstream firm also cut its guidance for expansion capital spending for 2020 by roughly 30%.
Zacks Rank & Stocks to Consider
The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include NGL Energy Partners LP NGL, Antero Resources Corporation AR and Centennial Resource Development, Inc. CDEV, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NGL Energy Partners’ bottom line for second-quarter 2020 is expected to rise 92.7% year over year.
Antero Resources’ bottom line for second-quarter 2020 is likely to improve 28.6% year over year.
Centennial Resource’s second-quarter earnings estimates have risen over the past 30 days, with two upward estimate revisions and no downward movement.
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