Pipeline Giant Kinder Morgan Stumbles on Weak Commodity Prices
Kinder Morgan, the behemoth behind 40% of the United States’ natural gas production, suffered a blow on Wednesday as it missed Wall Street’s third-quarter profit estimates. The company’s shares plummeted 2.6% in extended trading, citing weaker commodity prices and lower crude volumes as the primary culprits.
A Perfect Storm of Challenges
President Thomas Martin attributed the slump to refined product volumes that are expected to fall short of plans by 2% in 2023. This comes as U.S. WTI crude oil prices have dropped a staggering 8.1% year-over-year, sparking concerns about global demand. To make matters worse, crude and condensate volumes have fallen 4% from the same period last year, while natural gas transported rose a meager 2%.
Revised Forecast Sparks Concern
Kinder Morgan has revised its annual adjusted core profit forecast, projecting a 2% decline from its prior estimate. Start-up delays at its renewable natural gas facilities have contributed to this downward revision. The company had previously anticipated profits to be in line or within 1-2% below expectations.
A Glimmer of Hope in Data Centers
Despite the challenges, Kinder Morgan is banking on the artificial intelligence boom to drive demand for natural gas. CEO Kimberly Dang believes data center demand has “skyrocketed,” with the potential to increase the overall gas market by 25 billion cubic feet per day over the next five years.
Expansion Plans in the Works
The Gulf Coast Express Pipeline, operated and partially owned by Kinder Morgan, has given the green light to a $455 million expansion project. This will increase natural gas deliveries by 570 million cubic feet per day from the Permian Basin to South Texas markets.
Disappointing Earnings Report
Kinder Morgan’s adjusted profit of 25 cents per share fell short of analysts’ expectations of 27 cents. Its products pipelines unit, which includes refined products, saw adjusted core profit decline by 11.5% to $277 million.
Defending Permits in Tennessee
The company is currently working with agencies to defend its permits related to the Cumberland gas pipeline project in Tennessee. A U.S. appeals court has put the permits on hold, adding another layer of complexity to Kinder Morgan’s already challenging landscape.
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