Kinder Morgan, Inc. (KMI) May 5, 2026 Conference Transcript

good morning everyone my name is teresa chen and i am the north american midstream and refining analyst here at barclays it is my pleasure to host a fireside chat with kinder morgan one of the premier u.s midstream companies under my coverage with assets spanning across the country covering multiple commodity value chains across natural gas crude oil and prime products and with us is President of Kinder Morgan, Dax Sanders. Dax Sanders.

Dax Sanders Thank you, Teresa. Really, really happy to be here. And I've also got with me Peter Staples and Sean Pogue, our three-person massive European entourage here. So great to be here, and thanks for hosting.

Dax Sanders Love it. So diving right in, maybe we look at the macro side of things first, Dax. Over the past two months and change into the U.S.-Israel war with Iran, how do you think the energy landscape has fundamentally changed with respect to the U.S.'s role in liquids energy supply in particular. Right now, what is the tone like in your conversations with producer customers amid the emergent call on U.S. onshore production? And maybe bridging that to your near-term expectations as well, what is your view on the time you're likely to see a step up in activity across Europe?

Yeah, great question. I think, you know, all of us, certainly within the energy scope, are reacting to news that changes seemingly by the hour. I think with respect to long-term changes, it's pretty early to tell exactly what's going to change. I think certainly our direct conversations with producers haven't suggested yet that there's going to be a massive change. I think producers generally are looking for, and this is part and parcel with the substantial cash flow discipline and that's been imparted on U.S. producers over the past 10 to 15 years are looking for really long-term price signals before making substantial changes. In fact, I saw an interview with Mike Wirth yesterday saying Chevron wasn't really making any changes at this point. Now, I did see, and I haven't digested all the news in the last couple of days, but I did see, I believe, Diamondback, who's a large Permian producer, as part of their reporting yesterday, suggested that they were going to increase production. crude production in the Permian. So, you know, I think if you see sustained price signals, I think you will see incremental production by U.S. producers. Now, you know, that's really with respect to overall price response. If you look at the overall structural underpinnings of, you know, world energy production, world energy supply, I think there are probably going to be a lot of you know thoughts and conversations on where people are sourcing you know molecules of gas and barrels of oil vis-a-vis sovereign risk and you know if if people are looking at places and deciding that that a particular place with you know the straightforward moves being you know being front and center has a lot more risk than it maybe did three or four months ago then and they're looking for places that have less perceived sovereign risk. I think the United States is you know is it's probably one of the first places they look and I think I mean my personal view is over the long term you know this is going to be a substantial catalyst for for incremental development both with respect to production and associated infrastructure you know in the United States and in the first place you probably look from from an oil perspective is the Permian Basin. I mean the Permian produces roughly you know it's the most prolific U.S. Basin of about you know U.S. produces somewhere around 13 13 and a half million barrels a day of oil. I want to say about six and a half of that comes from the Permian Basin. It also is a substantial provider of gas roughly 23 BCF a day of gas coming out of the Permian and that really is all driven by oil production. It's you know we call it associated gas because oil is what drives, you know, the production decision, but gas comes out and, you know, a couple things. First of all, you can't flare it, you can't burn it. Oh, and it also has value. So, you know, that's led to a pretty substantial build out of gas egress out of the permeate over the past, you know, call it 10 to 15 years. And so that's probably the first place you look from a crude perspective with respect to gas you know the the i think of the world gas the world lng ecosystem um as being roughly you know 60 billion cubic feet a day something like that i think name plate's greater than that but if you factor in you know utilization rates it's probably somewhere in 60 maybe 65. um you know right now um it looks like uh the best numbers at least I think that we have are that roughly a couple, two to three BCF a day of liquefaction capacity in the Middle East coming from Ras La Fan slash the North Field is out and going to be out for roughly three to five years. Now, that could change. I mean, the amount that's out could change tomorrow, but that seems to be what the number is right now. U.S. liquefaction capacity is expanding. It's about 21 BCF a day right now, up from a blending of about 15 BCF a day in 2025, but it's effectively maxed out right now. There's incremental capacity coming online, and if you look at the basins that could provide that, the Permian is certainly one of those, the Marcellus, which is the biggest in the U.S. at about 36 BCF, but it's reasonably constrained with egress capacity and then you've got the haynesville which is right next to lng corridor at about 15 or 16. so um so you know that's uh that looks that's the landscape as we as we see it right now super helpful lay of the land um as far as you know the key drivers and where everything is coming from and dox i want to double click on the uh commentary related to the call on us lng

supporting incrementally positive long-term growth outlook for feed gas operators like Kinder Morgan. So we're still somewhat early days in the next wave of announcements and proliferation beyond what's been already under development. But what are you hearing from your liquefaction customers at the end of your pipelines in terms of additional expansions from here as a result of this call in the war? Do you anticipate further upward revisions to your already bullish outlook for feed gas demand growth as a result of all of these developments?

Yeah, you know, I think so. I think it goes. It's part and parcel with, first of all, the capacity that's actually been taken off right now. And I think, you know, as well as kind of the thing I touched on with respect to, you know, the people's perception of, you know, of sovereign risk. So, you know, I think that, you know, we think that, you know, right now the U.S. gas market is about 115 BCF a day, roughly, you know, 115, 116. We think that's going to grow, or rather, you know, the latest Wood Mack number suggests that's going to grow by roughly, I want to say, 19 over the next four or five years. Our numbers are actually a little bit more bullish. LNG growth is, you know, about 13 of that, so a pretty substantial piece of it, and we think that is, you know, that's going to continue, and, you know, you take one specific, and I don't have any information from this group, but, you know, you take Golden Pass LNG, which is one of the largest facilities coming on here pretty soon. That's 30% owned by Exxon and 70% owned by the government of Qatar. The government of Qatar clearly owns and runs Ras La Fan and is the developer of the North Field, presumably the largest field in the world. I think that it's probably reasonable to assume that there are calculus over the last three to four months about what, you know, what's the most practical to further develop is, you know, has probably changed a little bit. So, you know, we feel good about that. And we've got, you know, one of the ways we're playing it, and we think that, you know, our angle in this as an infrastructure company is to build the infrastructure around the assets like LNG that are going to be that are going to be you know key you know key assets we you know we have the largest natural gas network in the United States and we transport about 40 percent of all the gas around the United States about 40 percent of the liquefaction capacity or gas going into going into liquefaction and you know we've got right now we've got a backlog of projects and these are projects that are board approved that are that have signed binding agreements with credit worthy counterparties that we are deploying capital actively deploying capital against and that capital is about 60 percent of that backlog is actually related to power in the United States but about about 20 percent of it is related to LNG and one key pipeline we have on the LNG front is we call it the Trident Pipeline, which is a pipeline that originates in Katy, Texas, and goes north of Houston, goes to the Texas-Louisiana border, ties into our network and some other pipes in the Texas-Louisiana corridor. It'll transport about 2 billion cubic feet a day of gas, and this is gas that's coming out of the Permian, I talked about it earlier, that's moving into the Houston area, but But there's only so much that Houston can absorb. It needs to move east into the markets east. And so we're building this pipe. It'll start to come online towards the end of next year. And it'll be where it's under active construction right now. And it'll come in over the next year, sort of following that, get to a full run right after that. And so it'll really take, it'll be a connector for Permian egress gas and moving it into the LNG and even, to a lesser extent, power consumption corridors. And on that pipe, we will have the ability to expand that pipe by an additional BCF a day with just compression, you know, should the need, should the basin continue to expand and the need arise.

And on that brownfield expansion, would that be rather quick in terms of turnaround and commercialization, in your opinion?

Yeah, we haven't fully scoped out what it would be. But generally speaking, you know, compression expansions, as you noted, a brownfield compression expansion can be done a lot more quickly than a greenfield expansion where you're putting new pipe in the ground. So it definitely would be a lot, we would be able to get it done a lot more quickly than the timeline for this pipe, which is all green-filled new pipe in the ground.

Understood. So in addition to your sanctioned backlog, of which consists Trident and other things, I'd like to touch on your $10 billion of shadow backlog of natural gas projects and other projects. Can you share more details on these proposed opportunities, which are closer to, you know, reaching FID, even from a value chain perspective without naming individual ones? How much more of this shadow backlog could you realistically sanction in the year ahead?

So just, again, a little bit of a recap on because these are these are measures we use to communicate with investors on sort of what the future looks like and what what we think we can we can develop. So, again, starting with what we call our project backlog, which, to reiterate what I mentioned a minute ago, those are projects that have been board sanctioned that have binding proceeding agreements, long-term agreements that we are actually actively developing spending money on. That stands right now at $10.1 billion. We just updated it recently. You know, that consists of projects, as I said earlier, about 60% related to power. And, again, the – oh, yeah, sure. Yeah, about 60% of our projects are power-related. And within that, you know, I mean, data centers get a lot of conversation and airtime. But the power demand that, first of all, these contracts are generally with utilities. They're not directly with data center providers. They're with utilities that have generally solid investment grade ratings, generally sort of an A minus kind of level. And they're for power related to, you know, everything from demographic changes, migration into the U.S. southeast, coal to gas switching in power, reshoring of industrial demand in the United States, as well as data centers, you know, data centers as well. But I think the point is, is that there are a lot of drivers that we're seeing in our markets for incremental power that are beyond data centers. So, and then about, you know, roughly 20% is LNG, and the balance is, you know, other stuff, industrial, you know, miscellaneous, other things. So that's our backlog. Our shadow backlog that Teresa mentioned is another, you know, measure. I mean, investors have constantly asked us, well, what's next behind that? And so we've developed what we call our shadow backlog, which are projects that are under active development by our business development teams. You know, what they are not are, you know, an idea that's a hope and a prayer that somebody just kind of came up with over lunch and sketched out on a napkin. What they are are opportunities that we are in active conversations with customers on. We know that there's a demand. We know that there's a possibility of a project, but they haven't been approved by the board. They haven't been, we don't actually have signed agreements yet. It may be a situation where we've got competition, and there's a lot of competition out there. We have competition with other potential providers, or, you know, a customer may just decide to go in a different direction. So, but these are projects that we believe have a really good chance of being developed. And generally what will happen is over kind of a year's period of time, the projects on that list will work themselves out. And we will either get, some of them we will get, a lot of them we will get, some of them we won't. There will be new ones added. Some of them will go away. As we sit here right now, our shadow backlog looks a lot like our existing backlog. There's a lot of potential power. There's a lot of potential, you know, power demand out there. Largest area of demand is probably the United States, as I mentioned, southeast, which is where we have our southern natural gas pipeline, which is a joint venture with Southern Company, the big southeastern utility, which has a lot of power demand. There's also the desert southwest, where we have our EPAG pipeline. Out west, again, there's a lot of competition out there with the transwestern pipeline. And in the mid-continent as well, where we have our NGPL, Natural Gas Pipeline Company of America, that we own 37.5% of. So those are really the drivers behind kind of what we're seeing in our shadow backlog. But there's a lot of opportunity in the U.S. infrastructure market.

Got it. So between shadow and sanction, 20 billion dollars of potential opportunities out there 10 and change of which has been officially sanctioned yeah that's right um looking at the data center side specifically can you talk about kinder morgan's role in the soft bank consortium um organized to develop a 9.2 gigawatt data center project in ohio um will kmi need to expand your existing footprint in the region what will you What do you need to do to serve this project?

Yeah, great question. And what she's talking about is there was an MOU that was released by, I can't remember if it was actually released by SoftBank or the U.S. Federal Government. but it effectively is a consortium of people led by SoftBank and led by a big source of capital from the government of Japan as well as a host of other people looking to invest a substantial amount of capital in the United States for data center development in, you know, in different places. We were named in that as part of that consortium. We are thrilled to be part of it. We're thrilled to be working with SoftBank and the other members of the consortium. There hasn't been, you know, and the potential opportunity associated with that is not part of any backlog anywhere. We don't have any signed binding definitive agreements. but we do continue to work with the consortium and we hope that that's going to lead to something at some point because the development is real and we think there's a good opportunity but we haven't announced anything we haven't put any direct releases on ourselves and again, just to reiterate there's nothing associated with that in any one of our backlogs Understood, but it is interesting that you're the only midstream company named within that consortium period. Yes, that's right. And we were very happy to be the only one named in there.

So we talked a lot about your organic growth opportunity stacks. I'd like to touch on the inorganic side. Looking at your recently announced acquisition of Momentum Pipeline, can you shed more light on the strategic benefit that this asset will bring to your system, as well as the rationale behind purchasing an asset that is comparatively more expensive than what you typically build on your own?

Yeah, great question. And just to be clear, it's the Monument Pipeline. No, it's all good. There's a lot of M's out there. Yeah, so the Monument Pipeline, which we announced with our earnings a couple of weeks ago, and we actually just closed on that last week. It's an acquisition just north of $500 million. This is a short-haul piece of pipe just outside of Houston that ties really nicely into our existing network. It's got a set of customers, a small set of customers, with the largest customer being a customer that is one of our largest existing customers on the same asset. And so, you know, we look at a lot of M&A, potential M&A transactions. Anything that's close to what we do, we look at. We're always looking at something. Most things we're not going to get. Most things we are, you know, we're just, there's some buyer that's probably willing to take more risk or underwrite, you know, more, less concrete assumptions than we are. But if you look back over the last five years, I would say about every, you know, somewhere between, call it every year, but call it six months to 18 months, something will come along that is just an absolute fat pitch right down the middle of the plate. And this was one of those, you know, it's a pipe that, again, ties right into our existing network. There's an existing storage contract associated with this that the asset is that the seller had been using to supply storage service to the existing customers. We've got our own storage assets over time. We will transfer the storage, the providing of the storage service from the third party to our existing assets, and we've got some incremental capacity there that we're not using. So it's a really nice tuck-in acquisition. And exactly to your point, we are, I think, as you noted, when we build new pipe, we generally are able to construct it at a multiple, at a very attractive, you know, at a very attractive multiple. Our existing backlog, as we talked about, is about 5.6 times build multiple. And our history suggests that we can do that or better with new projects. Now, you know, even in the M&A market, even when we find an asset that we think is a really good fit, there's a lot of competition out there. And so, generally, you know, the price and the valuation for M&A assets is, you know, not as attractive as we would see a new build multiples, but still very attractive. So, as we said, you know, in the medium term, this will be, you know, sort of an eight times, you know, asset. And it's something we're very excited about and I think it'll be a really good tuck-in over time.

Great.

It'll be a really good talk in day one, but it'll be really good over time.

Understood. We talked a lot about your Gulf Coast assets as it relates to natural gas. In terms of the Permian needing additional residue gas egress, you clearly have a strong footprint there as well. Can we talk about your ability to execute on incremental expansions of GCX or any other flavor of Permian egress as you see fit as this demand grows over time?

Yeah, great macro question, Ann, as it relates to us. So the interesting thing about Permian, we talked about the Permian at the beginning of the conversation, But the interesting dynamic about premium gas is, premium gas egress, is that it has, you know, egress was needed. There was almost no egress, call it, 10 years ago. And gas production started to grow. And egress was needed. And egress, you know, a decent bit of egress was built. And there was a lot of speculation and worry that the egress was getting overbuilt. And guess what? Gas production just continued to grow as the Permian grew and egress grew as well. And so we've kind of had this, you know, sort of, you know, one step, one foot in front of the other, incremental egress, incremental production growing. As we sit here today, you know, today the Permian is short gas egress. You know, you're in really what you do is you look at the difference between the Waha price in the Houston Ship Channel price. in Waha is pretty consistently negative, which, again, is the price in West Texas. You know, we've got an expansion of our GCX pipeline, and we own our two – we've got several – two main and then a couple of ancillary pockets for egress out of the Permian heading eastward. We also have our El Paso natural gas pipe, which moves gas westward out of the Permian. But we've got a 570-a-day expansion of our GCX pipeline, which is coming online sort of like, you know, it's in the process of coming online right now. It'll be in later this quarter. With that, our pipes moving eastward are generally at capacity based on, you know, the amount of, you know, steel in the ground. There's also an additional 11 BCF, I want to say it's about 11 BCF of capacity, egress capacity coming online with some other pipes. Hugh Brinson, the Energy Transfers building, Iger, a couple of other pipes. So, you know, as those come online, you know, it feels like you're going to be, you're going to have enough egress capacity out of the Permian. Now, again, if you go back to what we started talking about at the very beginning, if there is a call on additional Permian crude capacity or Permian crude production and Permian gas grows, you could be short again. And I think if there is a new greenfield pipe that needs to be built out of the Permian, I think we certainly would be there and be ready to participate in that. You could, you know, potentially even see another, you know, pipe, you know, not compression, but looping of one of our systems coming out of there. But again, just to reiterate, I think we are very well positioned to be able to take the gas. As it comes out of the Permian and moves eastward, it moves right into our network, into our Texas intrastate system, potentially our Trident pipeline that we talked about. So we're very well positioned to move it even, move it further eastward.

I think, Dax, empirically speaking, the supply and demand balance for Permian egress has only surprised one side. But we'll see.

Well said.

So turning to the liquid side of your portfolio, I want to give some attention to this, too, because you have some major development and projects here. So maybe first on what's recently been in effect. Your conversion of your Bakken system from crude oil to NGLs, looking at that recent pipeline conversion, how do you think about the incrementally positive macro backdrop, the potential uptick in production at large for the U.S., what that means for the Bakken, and how that alters expectations for subsequent phases of your NGL system as it stands?

Yeah, so just to put a little finer point on what Teresa's talking about, we've historically had a crude pipe, a crude egress pipe out of the Bakken that originates in the Bakken and goes down to Guernsey, Wyoming. We announced a couple of years ago the intention to convert that into a natural gas liquids line to bring natural gas liquids out of the basin, and that's in the process of coming online right now. We've talked about potential future phases of that. And we don't have anything that we've announced on that. And I think, as we've said before, given how competitive it is up there, that's not something that we've elaborated on a lot. Although I would say we are putting a lot of energy in sussing out the next opportunities there. With respect to the overall macro, you know, we don't see the Bakken is having a, you know, a tremendous amount of growth associated with it. But that's that's OK from from a gas. And we also have a gas crude oil as well as gas gathering operation in the Bakken. You know, but but we don't necessarily see that as absolutely necessary to potentially drive growth. I think the wells up there are getting a little bit gassier, so we are seeing incremental gas, and we are seeing, you know, incremental, you know, NGLs. So we think that there's opportunity to, you know, to further develop our phase one, and we continue to work on that, but we haven't announced anything beyond that.

Fair enough. Elsewhere on the liquid side, touching on your refined products project. So Western Gateway, following the conclusion of a successful second open season, can you provide color on early learnings from both open seasons and whether your expectations for the project have changed at all relative to initial expectations?

Yeah, great question. I would say, first of all, expectations right now are reasonably consistent with what we thought about from the beginning. You know, the interesting thing is the desert, the plumbing for refined products in the desert southwest in California has been in a relative state of equilibrium for the past 70 years. And what we're attempting to do with our partner P66 is completely change that plumbing via this Western Gateway project that we're talking about. And the real change, the dramatic change that's happened, you know, over the past handful of years is you're seeing refineries in California shutting down. You've seen several, seen a couple of convert to renewable diesel. You've seen a couple shut down. And so refining capacity in California that has traditionally provided refined products to California and even moved products eastward into Nevada and Arizona, you know, is changing pretty dramatically. The other thing that you're seeing is the relative economics of Pad 2 refiners and even Pad 3 refiners, you know, has increased. And so what this project will do is reverse the flow of one of our pipes that's moving refined products from Southern California into Arizona to take products that will be brought from PAD2 and the Texas Gulf Coast westward into the Phoenix area and take product from Phoenix to supply California. And what this does, what it would do is, you know, provide really, you know, the next phase of refined product security for consumers in the desert southwest, in Arizona, in California. And so, you know, it's a big undertaking, but it's something we're excited about. The open season, as we said, was successful. You know, the next phase, as we've said, as I said on the earnings call a couple of weeks ago, is to negotiate a successful joint venture with our partner, P66, which we're working on. And, you know, we're optimistic that we'll get there and that we'll get it done. I mean, there's a big enough size of the pie to make this project work. But, you know, I mean, again, I think it's likely that we do. but if we weren't able to work something out then you know we would go back to I mean these are great assets that we have and we would go back to the you know the the state of equilibrium that existed for the past 70 years but but we think this is a project that at the market needs and you know we're excited about it well on behalf of all California residents we greatly welcome incremental refined products flowing into our state but I certainly hope this project passes FID.

But to your point about the state of SFPP at this point, there is a lot of debate on the value of SFPP as it stands, either as contribution to this project or on a standalone basis. Can you talk about the EBITDA and earnings outlook for SFPP if this project was not to come to fruition? How do you see that evolving over time?

Yeah, well, first of all, these are really good solid assets. They're good cash flowing assets. They are they are assets in markets that are that have existed for for a very long time with solid demand. There are certain places that they serve that have really favorable demographics. I mean Maricopa County both our east line and west line serve serve Maricopa County which is where Phoenix is which is a very fast growing fast-growing metropolitan area. We in part also serve the CalNIV pipeline, which is serving Clark County, Nevada, which is growing as well. So these are really good, solid-growing assets. They've got really good traditional fixed-cost economics associated with them. Those of you that know the way refined products and oil pipes work in the United States, every five years the FERC sets an index adder or subtractor that you apply to the producer price index that sets effectively how much you can raise your tariffs each year. And so, you know, it's an inflation plus or minus. The past five years, it's been PPI plus 0.78. FERC just reset it for the next five years at minus, roughly minus half a percent. But again, that's off PPI, which is a substantially positive number. So what What that does is it provides, you know, an inflation escalation component to your tariff that allows you to raise basically grow revenue each year. So these are really strategically important assets. They cannot be replicated. You're not going to build a new gasoline pipeline in California, you know, anytime soon. And they are absolutely critical to meeting the demand that exists today. So these assets are going to be worth a decent valuation, whether they go into part of this JV or continue to operate as they have for the last 70 years.

Fair enough. And we spent the bulk of our time talking a lot about your fee-based assets, the fee-based contracts, and the long-duration nature of those cash flows. But you do have a modest amount of torque within your system as it relates to this macro backdrop that I don't think we can ignore given the current environment. I'd like for you to, you know, talk about this potential uptick if either producer activity materializes or the elevated and volatile commodity price environment persists. Can you elaborate on the specific sources of earnings upside across your diversified footprint? Yeah.

Well, the first thing I would say, you know, one of the most important aspects of our entire network, and this goes for the entire United States natural gas grid, but the utilization of our network back in 2016, 10 years ago, was about 74 percent. And today, that number is at or north of 90%. So what that says is, you know, the competition for the, you know, the incremental molecules, space molecule in our pipelines just continues to increase. And so, you know, we are able to benefit from that when, you know, when situations, when the right situation presents itself in extreme events like extreme weather events. So you've got that. That's probably the most fundamental thing associated with our business. But, you know, to your point about specific items related to torque, we do have our CO2 business, which is a tertiary oil production business. You know, that business is a small part of our overall company. You know, it generates about $300 million a year of free cash flow. So we generally hedge about 90% of our budgeted barrels going into a particular year, but we've got 10% that are generally floating throughout the year to the extent that we outperform. We have the ability to capture that. We are outperforming in our crude production this year. You know, we have a transmix business where we are, you know, buying downgraded product and then upgrading it back to what it was before it was downgraded. So we get to capture that spread. We've got, you know, we've got some blending businesses. And then we've also got businesses that are, those are, you know, kind of specific. We do not have a lot of commodity exposure as an overall company, but that just highlights some of the areas where we have a little bit of commodity exposure. With respect to volumetric exposure, I think to the extent you're seeing a lot of incremental volumes, if you're talking about torque, if you have high prices and then you have volumes that are driven by that, we've got gathering and processing. We've got a couple of gathering and processing businesses. I mentioned the crude business in the Bakken. We've also got a gas business there. We've got a gas gathering and processing business in Haynesville. And then we've also got probably the largest number of export docks that accommodate refined products exports in the United States, and those are running about as full as they can possibly run right now. And we've also got crude pipes that have some exposure to the crude export markets. So those are all things that are, again, the fundamental piece of our business is We are a fee-based energy infrastructure business. That's our core business. But to your point about where do we have some torque, we do have a little bit of torque around the edges that we're able to capitalize on.

Wonderful. Well, we are about at time. Thank you all for participating and coming. Thank you very much, Dax, for this lovely discussion.

Thank you. Thoroughly enjoyed it.