Richard Kinder

Executive Chairman of the Board, Kinder Morgan Inc

Kinder Morgan Inc ($KMI) Q2 2025 Earnings Call

🎥 Jul 01, 2025 📺 Castify Earnings Call ⏱ 56m 👁 1 views

KMI - Earnings call Q2 2025.

About Richard Kinder

During Kinder Morgan’s second quarter 2026 earnings call on July 22, 2026, Executive Chairman Rich Kinder described the quarter as “another strong quarter,” stating that the company’s earnings before allocation (EBA) and earnings per share (EPS) exceeded both the prior year and the company’s own budget “by significant margins.” Kinder said the natural gas growth story “remains very positive,” citing continued demand for LNG export volumes and gas for electric generation. He noted a “convergence of inquiries” in the market area and said the company’s goal is to “try and get these knocked down as fast as we can.” Kinder also highlighted the company’s long-term track record, stating that over 29 years it has grown enterprise value at a compound annual rate of approximately 22% while paying out over $40 billion in dividends. In response to a question about growth opportunities, he said the company has “a lot of opportunities” and expects to move quickly on them, adding, “we have to get the horses in the corral.”

Source: AI-verified profile updated from Richard Kinder's recent appearances. Browse all interviews →

Transcript (79 segments)

Operator0:00

Good afternoon and thank you for standing by and welcome to the quarterly earnings conference call. Your lines are in a listen-only mode until the question and answer session of today's conference. At that time you may press star followed by the number one to ask a question. Please unmute your phones and state your name when prompted. Today's conference is being recorded. If you have any objections you may disconnect at this time. It is now my pleasure to turn the call over to Mr. Rich Kinder, executive chairman of Kinder Morgan. Sir, you may begin.

Richard Kinder0:30

Thank you, Michelle. Before we begin, as usual, I'd like to remind you that KMI's earnings released today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934, as well as certain non-GAAP financial measures. Before making any investment decision, we strongly encourage you to read our full disclosures on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release, as well as review our latest filings with the SEC for important material assumptions, expectations, and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. In previous quarterly calls, I've emphasized the positive attributes of the natural gas story, concentrating primarily on the rapidly growing demand in America. But as we all know, the gas market is international in nature and a great deal of the growth potential for US production is driven by that worldwide increase in demand. So I thought today I would spend a bit of time sharing some thoughts on what's driving that overseas growth. A chief economist of a major oil company recently estimated that global gas demand is expected to increase by 25% over the next 25 years. And I don't believe that that projection is unreasonable and it affirms my belief that natural gas will inevitably remain a key source of energy for the long term around the globe. The factors underpinning that growth are pretty easy to understand. Demographers project continued substantial growth in worldwide population over that time period in the range of two billion additions by 2050. A great bulk of that increase will occur in the emerging markets of Asia and Africa where the need for energy is particularly acute as large portions of the population move into the middle class which drives additional energy consumption because there is a lack of local production and an inability to access gas by land-based delivery in most of those nations. It will be LNG which will satisfy the bulk of this additional demand. And I think it will grow faster than the overall demand for natural gas. Now what's the impact of all this international growth on the US energy segment? I believe that American exports of LNG will play a critical role in supplying this international LNG demand. The US has been the top global producer of natural gas for 15 consecutive years and the world's top exporter of LNG since 2023. I believe the US role becomes even more important in light of recent developments in the Middle East. Customers on the receiving end want security of supply without undue worries about disruptions caused by military actions and this benefits the position of US supply. This makes us confident that a major portion of the LNG required will move through America's rapidly growing liquefaction terminals. Consistent with this view is the recent estimate of S&P Global Commodity Insights that LNG feed gas demand in America will increase by 3.5 BCF a day this summer compared to the summer of 2024 and that it will more than double by 2030. That should be a real positive for Kinder Morgan in as much as we move about 40% of all the feed gas for those facilities. When you add the LNG, the international LNG growth to the robust need for gas to satisfy US domestic power and industrial demand, examples of which are reflected in the new expansions that Kim and the team will be discussing on this call. It signals to me that the positive natural gas story has legs and will last for decades to come. With that, I'll turn it over to Kim and the team.

Kim Dang4:41

Okay, thanks Rich. Our financial results for the quarter show strong growth over the second quarter of '24 with adjusted EBITDA increasing by 6% and adjusted EPS increasing by 12%. For the year we currently expect to exceed our original budget which already reflected very nice growth by at least the contribution from the Outrigger acquisition. It's an amazing time to be in the natural gas industry. This is certainly the best opportunity set I've seen during my 24 years in this industry. The underlying market fundamentals are strong with US natural gas demand expected to grow by 20% between now and 2030 by WoodMac estimates. The federal permitting environment has improved. The US Army Corps of Engineers is issuing permits very quickly. We've seen some recent FERC action which is helpful including a 50% increase in the prior notice limit and a one-year waiver of the five-month waiting period between the time before you can start construction between the time the permit is issued and you can start construction. So, the Supreme Court ruling on NEPA should help narrow the scope of the NEPA reviews and make nuisance lawsuits more difficult. The recent budget reconciliation bill delivers nice tax benefit, including incentives for investment and expanded interest deductions. As a result, we expect significant cash tax benefits in 2026 and 2027 and do not expect KMI to be a material cash taxpayer until 2028. The one fly in the ointment is tariffs. However, at this point, we still do not believe that the tariffs will have a significant impact on project economics for our large projects, MSX, South System 4, Trident, GCX, and Bridge that together comprise almost two-thirds of our backlog. We currently estimate that the impact of tariffs to be roughly 1% of project cost, which has not changed from our estimate last quarter. Our project backlog increased from 8.8 to 9.3 billion during the quarter. We added 1.3 in new projects and placed approximately 750 million of projects in service. The projects we added included Trident Phase 2 and the Louisiana Line Texas Access Project which include moving natural gas from Katy, Texas into the Louisiana LNG market. We also added two NGPL projects to serve power plants. All these projects are underpinned by long-term contracts and have attractive returns. We also approved approximately 500 million of capex for Kinderhawk, which is supported by life of lease contracts to accommodate a significant volume ramp up by our customers. Currently, approximately 50% of the projects in our backlog will serve power demand. The multiple on the backlog is around 5.6 times slightly improved from Q1 as the projects we placed in the backlog were at a lower multiple than the projects we placed in service. Overall, despite $6 billion in project additions to our backlog in the past year, we continue to see very nice future investment opportunities. As Tom Martin said to me the other day, we aren't in the first inning anymore, but we aren't anywhere near the seventh inning stretch. Our strategy remains unchanged. We own and operate stable fee-based assets, which are core to the energy infrastructure. We use our significant cash flow generated by these assets to invest in attractive return projects, and we return money to our shareholders, all while maintaining a solid balance sheet. With that, I'll turn it over to Tom.

Tom Martin8:51

Thanks, Kim. Starting with the natural gas business unit, transport volumes were up 3% in the quarter versus the second quarter of 2024, primarily due to LNG deliveries on Tennessee Gas Pipeline as well as new contracts and LNG deliveries on our Texas Intrastate system. Natural gas gathering volumes were down 6% in the quarter versus second quarter of '24 across most of our G&P assets. The biggest impact being in our Haynesville system. Sequentially, total gathering volumes are down 1%. Our producer customers are still ramping back up after lower gas prices in the second half of 2024. For the full year, we expect our gathering volumes to average 3% above 2024, but 3% below our '25 budget. We anticipate gathering volumes will grow over the balance of the year given the higher price environment than in 2024 and the need for increased production to meet LNG demand growth that is ramping up throughout the remainder of the year. Looking forward, we continue to see significant incremental project opportunities across our natural gas pipeline network to expand our transportation and storage capabilities in support of the growing natural gas market. In our products pipeline segment, refined products volumes were up 2% and crude and condensate volumes were also up 2% in the quarter compared to the second quarter of 2024. For the full year 2025, refined products volumes are forecasted to be approximately 2% higher than in 2024 and flat to our budget. In our terminals business segment, our liquids lease capacity remains high at 94%. Market conditions continue to remain supportive of strong rates and high utilization at our key hubs at Houston Ship Channel and the New York Harbor. Our Jones Act tanker fleet is fully leased today and through the remainder of 2025. Assuming likely options are exercised, the fleet is 100% leased through 2026 and 97% leased through 2027. We have opportunistically chartered a significant percentage of the fleet at higher market rates and have extended the average length of our firm charter contract commitments to four years. The CO2 segment experienced slightly lower oil production volumes at 3%, higher NGL volumes at 13% and lower CO2 volumes at 8% in the quarter versus second quarter of 2024. For the full year, oil volumes are forecasted to be 4% below 2024 and 1% below our 2025 budget. With that, I'll turn it over to David.

David Michels11:46

Right. Thanks, Tom. Okay, so we're declaring a dividend for the quarter of 29.25 cents per share, which is a $1.17 per share annualized and 2% up from our 2024 dividend. For the quarter, we generated net income attributable to KMI of $715 million, which is 24% above the second quarter of 2024. We generated EPS of 32 cents, up 6 cents from last year. Some of that benefit was due to favorable mark-to-market on unsettled hedges which we treated as certain items. But on an adjusted net income basis which excludes certain items we generated $619 million and adjusted EPS of 28 cents up 13% and 12% from last year respectively. Though even excluding the favorable certain items, we still experienced nice double-digit growth from last year. Our growth was driven by greater contributions from our natural gas expansion projects, the Outrigger acquisition, and attractive natural gas capacity sales and other services driven by favorable demand on our assets. We also received greater contributions from our Jones Act tankers. On the balance sheet, we ended the quarter with 32.3 billion of net debt and a 4.0 times net debt to adjusted EBITDA ratio. That 4.0 times is down from 4.1 times from the first quarter which was right after we'd closed the acquisition of Outrigger. We expect to end the year with net debt to adjusted EBITDA that rounds up to 3.9 times. Our net debt has increased by 623 million from the beginning of the year. And here is a high-level reconciliation of that change. We generated cash flow from operations of 2.811 billion. For the first two quarters, we paid dividends of $1.3 billion. We've invested total capital of $1.42 billion. The Outrigger acquisition was approximately $650 million. And all of our other items were a use of cash of about 65 million. And that gets you to the 623 million increase for the year. As Kim mentioned, we expect to exceed budget by at least the contribution from the Outrigger acquisition. Our budgeted 2025 adjusted EBITDA growth from '24 was 4%. Just including the Outrigger acquisition, our EBITDA growth would increase to 5%. And our adjusted EPS growth would remain at an attractive 10% from 2024. Most of our 2025 budgeted growth comes from expansion project contributions. And we remain on target to place those expansion projects in service on time and on budget with only minor variances. The largest expansion contributions come from our Evangeline Pass project and our South Texas to Houston project on our Texas Intrastate system both of those are now in service. So in my final items in June Moody's placed our credit rating on positive outlook and they joined S&P who put us on positive earlier in the year. Our credit spreads have already improved some as a result. So we're off to a good start for the year tracking to beat our budget. We've sanctioned additional attractive projects that will add to our future growth and expect meaningful cash flow benefits from tax reform. I'll turn it back to Kim for Q&A.

Kim Dang15:19

Okay. Michelle, if you'll come back on and we will take questions.

Operator15:24

Thank you. At this time, if you would like to ask a question, you may press star one. And to withdraw your question, please press star two. One moment, please, for the first question. Teresa Chen with Barclays, you may go ahead.

Teresa Chen15:40

Good afternoon and congratulations on the progress in the commercial backlog under what seems to be fierce competition. Do you think the commercial landscape has changed with these demand tailwinds on a structural basis and what do you think has allowed Kinder to win many of these projects and what kind of learnings can you share that might shape your strategy going forward on the heels of these commercial wins?

Kim Dang16:04

Okay. A couple of points on that. One I think what part of what allows us to be competitive is the existing asset footprint that we have. We've got an outstanding footprint and so we are very competitive where we can build off of that footprint or and/or use the existing footprint to deliver volumes to customers. I'd say the other things are I think people trust us to be able to build projects and get them delivered. And so if they've got a significant investment that, you know, they need natural gas delivered, they don't want to be waiting on those molecules when they get that project in service, they want to be able to have the supply there. So, I think our track record in building and delivering projects is helpful. And then I think the way we operate and the customer service that we provide in terms of trying to make sure that if we have maintenance or other items that our customers know well in advance. Trying to make sure that we perform that maintenance at times when our customers would be least impacted and trying to find times when we can find alternative delivery for them. So, I think that's some of the things that go into the commercial discussions and allow us to win projects. And I think you can see from what we've added to the backlog, we've been very successful.

Teresa Chen17:54

Thank you. And looking forward on additional projects to come potentially in the backlog as far as the expansion westward from the Permian, what is the progress on building additional natural gas infrastructure on that front and what would something like Copper State Connector amount to in terms of cost economics as well as the potential for subsequent brownfield expansions down the line?

Kim Dang18:22

Okay, let's don't get too far ahead of ourselves. On Copper State, there's clearly a need in Arizona. I think the Arizona utilities have need for more natural gas. I think there's the potential for data centers and we're having conversations on those fronts. Obviously, that would be a large project. There are other smaller projects that we have that we're looking at. But it is a competitive process on Copper State. And constantly changing tariffs make things more challenging on these larger projects where we've got to come to agreement with multiple different shippers. And then any project that we do on this front, the project's going to have to meet our return thresholds. And so we're going to be very disciplined about how we deploy capital on this, but a project could be anywhere from four to 5 billion-ish.

Teresa Chen19:28

Very helpful. Thank you.

Operator19:33

Thank you. Our next caller is Michael Blum with Wells Fargo. You may go ahead, sir.

Michael Blum19:39

Thanks. Good afternoon, everybody. I had a capital allocation question really between gas pipelines and gathering investments. You talked about this big opportunity set on the gas pipeline side. Your average multiple, you know, between five and six times, but how do we think about a $500 million investment in Kinderhawk? Does that mean this Haynesville investment is generating an even higher return than that given the higher risk profile? Just kind of think through all that.

Kim Dang20:11

Okay. Sure. So, let me start by saying no change in the way that we make our investment decisions or in our approach to investment or investment returns. The way we've always done it is, you know, we look at the risk-reward. So, you're looking at, on the risk side, you're looking at how stable are the cash flows. And so that gets into, okay, is it a take-or-pay contract or is it a life-of-lease dedication? Does it have, if it's a take-or-pay, is it a 5-year contract or is it a 20-year contract? What's the credit on that? And so, when you have longer contracts with higher creditworthy partners and they're take-or-pay, then within our return threshold range, you're going to skew to the lower side of that range. And when you have things that have commodity exposure or volume exposure, then you're going to look for a return at the higher end of our target range.

Michael Blum21:23

Okay, great. Thanks for that. And then just want to see an update how you're thinking about behind-the-meter opportunities. I know you've talked about maybe having something in place with partners where I want to see where that stands and how meaningful a driver of future capex that could be. Thanks.

Kim Dang21:42

So I think when we think about where we've seen the most action on the data center front if you will is really from regulated utilities. So that's where we're seeing most stuff get done. So, a regulated utility is able to put it in their rate base. They're going out, they're getting a PPA with the data center provider. We have not seen a lot of IPPs that have announced projects at this point in time. But obviously we are talking to them and that's a reasonable possibility because I think if IPPs can get contracts they'll be able to build as well but I'm going to turn it over to Seth and he can talk a little bit more about our strategy there.

Seth Babick22:31

Yeah. So, one of the things, as we look at the landscape on data centers, speed to market is key. And so, as we look at the opportunity set, as Kim said, our focus has thus far been on the utility side and helping them with their power needs. We are looking at a broader structure such as where we got some key partners that specialize in their respective fields. Our expertise lies in bringing supply to the points. We bring storage and then we let the other folks do what they do best including hyperscalers that know how to build data centers. And so, I think the concept is we are looking at a few key sites in different areas and seeing if we can kind of pull together a bigger broader project specifically tied to behind-the-meter.

Operator23:33

Thank you. Our next caller is John McCay with Goldman Sachs. You may go ahead, sir.

John McCay23:39

Hey, everyone. Thank you for the time. I'm going to pick up on this project thread, of course. Maybe just talking about the backlog on the gas side, you mentioned about 50% power utilities at this point. That's arguably a larger share than power has in kind of the go-forward gas demand growth we're looking at relative to LNG I suppose. Maybe could you just talk a little bit about how you'd expect that 50% to kind of trend from here? Would incremental projects on the horizon maybe putting aside Copper State for a second start leaning more LNG but I mean we need to wait some more FIDs maybe just frame up like how that mix looks over the next couple quarters or years.

Kim Dang24:26

Yeah, I mean I'd say it's hard to project exactly what that mix is going to look like obviously the biggest driver of demand growth both in WoodMac projections and in our internal projections is LNG And there's a doubling of, expected doubling of LNG. As we've said a number of times, those LNG projects, generally when they get sanctioned, there's an initial project that is sort of a mainline from the facility to the nearest liquid point. But then generally as they move forward with their development, they're looking to find more competitive supply and diversified supply. And so that leads to additional projects down the line. One of the things that we've consistently said and that we consistently see is, and this is especially true in the WoodMac numbers, is we don't think that the WoodMac numbers accurately reflect the growth that we think we're going to see in power demand. And that could be a difference between the volumes that they expect to flow and what we expect to sign up in terms of long-term take-or-pay contracts. But the demand, the breadth and the scope of the power demand is very enormous. And so we're seeing power demand in Arkansas, Louisiana, Georgia, South Carolina, Arizona, Wisconsin, Texas. And so the amount of power demand I think and the projects that we're going to see on that front are when you look at that relative to the expectations for demand in power I just think there is an alignment there.

John McCay26:35

That's helpful. That's interesting. And maybe just for my next question you touched on the new tax rules. Should open up some incremental cash flow for you guys. I guess just wondering if you can kind of put a bit of a number around the incremental cash kind of looking forward and then on a related point, does it change how you think about your ability to go after projects, your kind of implicit cost of capital? I know you're kind of just defending the return profile you want to get, but does an incremental tax framework change that at all?

David Michels27:13

Hey, John, it's David. For the tax reform benefit, we're not quantifying it any more specifically than just saying we've got nice benefits from it beginning in 2025. It's not material in 2025 to our forecast, but we'll see some benefits this year because it was retroactive to the beginning of the year. We are seeing substantial benefits in '26 and '27. So, as Kim said, we don't expect to be a material federal income taxpayer in either of those years as a result of the tax reform. We see nice benefits thereafter, but we're not quantifying those. And it also depends a little bit on when we put new projects into service because the full expensing provision is really the biggest piece of the benefit that we're getting from tax reform. And I would say, having that incremental cash flow doesn't change our investment strategy. So we're not moving our return thresholds because we have incremental cash flow available. I think our view is and continues to be that for good return projects there's unlimited capital and we will find a way to finance them. So obviously we've got a lot of cash flow available more now than we did before. We've got room on our balance sheet. And I think with the projects that we're doing, they're attractive projects and so if we ever needed to, we could bring in outside capital.

Operator28:48

Thank you. Our next caller is Jeremy Tonet with JP Morgan. You may go ahead,

Sir.

Hi, good afternoon.

Good afternoon, Jeremy.

Jeremy28:59

Want to turn to Arkansas if I could. We've seen recent reports of hyperscaler activity there and want to double click on your Texas Arkansas power project. Noticed a binding open season there and given the 400 already pre-arranged there, it seems like that could support two gigs, very nice size for the project right there. But do you expect more to come along at that point? Do you see the possibility for more demand beyond that or really you kind of have a fit-for-purpose pipe right here and ready to go? Anything you could provide as far as incremental details there would be helpful.

Kim Dang29:39

Yes, Jeremy. I'll backspace on that and tell you that that project is supporting power, but broadly when you think about the opportunity set, we are seeing incremental opportunity set not only in Arkansas, Texas, but along that Midwest corridor. We do see incremental demand on the power side. Where the utility ultimately uses it, that'll be up to the utility. As we talked about, we're looking at our own behind-the-meter opportunities. And so I think there is a robust pipeline of opportunities that we are trying to pursue specifically in Arkansas and really broader across the network.

And I'd say we don't always know if the power is going to a data center or what exactly they're using it for. So we don't always have clear visibility through, you know, our customer is typically the power plant.

Jeremy30:46

Right. Understood. Just the size of it there could support some nice power for the utility, not for Kinder. Understood there. But I'll leave that there. I'm just wondering, post the Georgia Power IRP filing here, does this impact the opportunity set as you see it in the southeast? Could there be upside, I guess, to your current expansion plan scope to make those expansions larger?

Kim Dang31:11

Yeah, look, as we've alluded to on previous calls, I think there is a broader opportunity set. We're early in our discussions there, but the fundamentals look sound and the opportunity set looks good. Obviously, we're positioned well with the network there including the latest set of expansions and as we alluded to on the last call, I think Rich said we've got ancillary expansion opportunities to layer on top of that. We will pursue those as they present themselves.

Operator31:47

Thank you. Manov Gupta with UBS. You may go ahead, sir.

Manov Gupta31:52

Good afternoon. It looks like you have increased the size of Trident from 1.5 to 2 BCF. And as I remember you did this with Mississippi Crossings. Also the pipe got announced at 1.5 and got scaled up very quickly to 2.1. So I'm trying to understand what's driving this incremental demand. You come in, you announce a project and very quickly you're able to size it up. So help us talk through those dynamics a little.

Kim Dang32:18

Yeah, I mean on Trident the incremental demand is associated with LNG and it was a fairly easy expansion because all we needed to do was add some compression. I think when you go to a phase three then that would require some looping. So that's a little bit bigger nugget to take on and so that would require more volume to do phase three, but that pipeline is in a great location. And to be able to get molecules from Texas all the way over into Louisiana is something people have been trying to do for a long time. And the combination of Trident and KMLA does that.

David Michels33:05

Yeah, in terms of the timing piece, Manov, really it's when we get the executed contracts to get us the returns that are sufficient. We know we have other customers that are interested. We'll size the project if it makes sense and then we continue to try and build upon it. That's been the strategy.

Manov Gupta33:25

Perfect. And it looks like the backlog you also benefit from the NGPL new projects. Can you talk a little more about these projects? Looks like the power plant related projects. So, if you could help us understand these incremental projects from NGPL that added to the backlog in this quarter. Thank you.

Kim Dang33:43

Yeah, they're both power projects to serve power demand. One's in Arkansas and one's in Wisconsin essentially.

David Michels33:50

Yeah, that's probably all we can tell you at this point.

Operator33:56

Thank you. Our next caller is Jean Anne Salisbury with Bank of America. You may go ahead.

Jean Anne Salisbury34:02

Hi, I just wanted to follow up to Kim's answer to John's question earlier about when LNG projects sign up for their gas pipeline needs vis-a-vis when they get sanctioned. You've obviously had a ton of LNG contracting activity over the last quarter. I think you're probably still to come this sort of large wave of sanctionings. So I guess my question is if you believe that those projects have kind of already signed up for the gas takeaway that they would need or if that's basically coming as they sanction the projects over the next year.

Kim Dang34:35

Yeah. Generally what we see and CE will jump in here is that when a project gets to FID, they need to get their financing and put their financing in place. And so to put that financing in place, usually they've got to have a gas supply. And so that's when the initial project, as I'll call it, from the facility to the nearest liquid point gets sanctioned. And then generally what happens after that is as they continue and they're starting to get closer to in service, they decide, okay, and they're thinking about really how am I going to supply this on a daily basis. Then they start looking at okay that liquid point is very competitively priced. I might want to get some cheaper molecules and or what happens if a pipe goes down or something and maybe I also need some diversification. So that happens more over time between the time the project gets sanctioned and before it gets put in service.

Richard Kinder35:40

And let me just add to what Kim says that given the fact that this demand is occurring primarily along the Gulf Coast where our system is so extensive, this kind of opportunity just lends itself to a structure like we have. I think we cannot overemphasize the benefit that we have from the infrastructure that already exists and the ability to expand it on a reasonable basis.

Jean Anne Salisbury36:07

That's very clear. Thank you. And then as a follow-up, I wanted to ask about some of the dynamics of Permian gas pipelines. We're very tight on egress capacity today, but something like 5 BCFD comes online next year, including your own GCX expansion. And I think there are a few other possible projects out of the Permian that seem to be progressing. So, I guess the question is if there's some concern that this could put pressure on rates for Kinder Morgan later in the decade if some of those initial pipeline contracts begin to roll off. Can you just kind of talk about how you would frame that risk of Permian overbuild?

David Michels36:39

Sure. So the contract GCX and PHP are our two, I think those 10-year contracts expire in '29 and '30. What I would say is given that those were some of the first pipelines built out of the Permian to the Gulf Coast, they have very attractive rates on them. And so it's two things. One is I think they are lower rates than where new projects are getting priced. So there's going to be some of the cheaper transport out of there. And then, you know, the... I forgot what the second point I was going to make but go ahead.

Kim Dang37:21

Yeah. So I mean the other thing as we think about the two pipes that we have if you're talking about kind of recontracting risk etc. Those pipelines fit very well in our network and we have the ability to extract probably in my view better value once those, if those aren't recontracted. And so we view that risk as low. When we think about the next project out of the basin we're going to be very prudent if, as we think about our focus has shifted to demand pull when you think about the projects that we sanctioned over the last couple of quarters. So if there is another producer push project it would obviously have to be very well contracted and for a longer term.

David Michels38:08

So those pipes go into our Texas intrastate system, they feed contracts that we have in the Austin market. So we have in-use demand attached to that and that's something that we can offer shippers and customers that other people can't offer. And then the other thing I was going to say is that when we run our economics in order to be conservative to make sure we get good returns on these projects, we assume generally we assume a step down in rates whenever contracts roll. Not saying that that's going to happen here. But that's part of how we make sure that we get the returns we're expecting to get.

Operator38:53

Thank you. Our next caller is Keith Stanley with Wolf Research. You may go ahead, sir.

Keith Stanley38:59

Hi. Good afternoon. Wanted to start on the $500 million Haynesville gathering project. When would the expansion capacity be in service and what's the projected timeline for the volume ramp to get to returns? And then relatedly, how do you think if at all about potential Haynesville takeaway pipelines given all the Louisiana LNG projects we're seeing and your expanded gathering presence?

Kim Dang39:25

Sure. So on your first question, we plan on getting all of our facilities in by the end of the fourth quarter next year. And so, we do see volume ramping up along the way. Really, we're adding treating capacity and we're adding incremental pipe loops just to unlock some of the hydraulics there. Look, as we think about the outlook in the Haynesville, you've got a very productive basin that's very close to the demand centers that we've been talking about. And so, there's a definite need to get incremental molecules to those consuming bases, the consumers, right? We got to get the physical molecule there. As far as the buildout, the existing buildout that's there, given the growth that we see on the Gulf Coast, I think all that does is creates incremental opportunities for us in both our interstate and intrastate networks to be able to connect the dots. You've got a lot of convergence at Gillis right now. We're exploring opportunities downstream of Gillis to connect the market to that supply that's aggregating at Gillis and if there's an opportunity we could even consider tying in some of that Kinderhawk production on another takeaway project out of the basin. But once again, all of that's got to be contracted for and it's got to make economic sense.

Keith Stanley40:57

Great. Thanks for that. The second one I wanted to follow up on some of your opening comments, Kim, on the permitting improvement and the Order 871 and no longer having to wait the five-month waiting period before starting construction. When you think in aggregate about those improvements that you're seeing, could this meaningfully accelerate the timeline on some of your larger projects versus original expectations?

Kim Dang41:23

So the answer is it depends. So this is a one on 871. It is one year, but they've got it out for notice and comment. And I think our expectation is that they likely make this permanent, but we'll just have to wait and see. And so right now with respect to the one-year extension, not a lot of benefit for us, but if they make it permanent, then yes, there will be benefits to our major projects and so it's going to depend and the reason it depends is it depends on the procurement schedule and so when we get the pipe and when we get the compression. So there are certain projects that we will be able to move up by that five months and take advantage of and there are others that we won't. The other thing I'd say is on the prior notice that's increased by 50%. So now it's $61 million. That means you don't have to file for a 7(c) for projects that are less than $61 million. So the permitting process is much quicker. And so we will definitely benefit from that increase in the prior notice limit. The other thing I'd say on the bigger projects is we've actually filed for a waiver for 871. So we're not waiting on the notice and comment period to be complete. We've asked them to decide independently on our big project South System 4 and MSX and I think we view the likely outcome of that favorably at this point.

Operator43:16

Thank you. Our next caller is Zach Van Ever with TPH. You may go ahead, sir.

Zach Van Ever43:23

Hi guys. Thanks for taking my question. Just going back to the Haynesville expansion real quick, can you guys speak to the volume or capacity that you're adding there? And then is this mainly from your larger customers or are you seeing demand from some of the privates that feed your system as well?

Kim Dang43:43

It's both. So, it's from the larger customers and it's from the privates. And somebody may be able to speak to the capacity but I mean they are ramping up significantly. You know if you look at our supply numbers and Tom help me with this because you talked to the board about this today but we are expecting, WoodMac is expecting a doubling in the production coming out of the Haynesville. So I mean it's increasing by I don't know from 13 to 26.

Tom Martin44:16

26.

Kim Dang44:17

To 26 by 2034. So I mean that gives you a sense of the type of volumes that we are talking about.

Zach Van Ever44:28

Gotcha. That makes sense. And then maybe one on the LNG side. I know Tennessee Gas feeds the Plaquemines facility and VG continues to talk about potential further expansion at that site. If they were to do that, does Tennessee Gas have the ability to expand more to feed LNG in that area?

Kim Dang44:52

So first, if they were to do that, I think it further creates opportunities for us, with these projects that we're bringing across. I think ultimately it could, Tennessee is already full in multiple directions, but we've got the bottleneck, debottlenecking capability as we bring this incremental supply from west to east that I've been talking about on the last few calls. We talk about Texas Access Project, which is kind of continuing on the theme. We talked about Trident, then we talked about the header, and now we're actually extending into Texas to take volumes across to Louisiana. That helps debottleneck and so if Plaquemines were to further expand we would look at opportunities to bring incremental gas to the basin, to that area from not only MSX but some of our other pipes in the area including potentially looking at accessing the Haynesville in a different direction. And so, when we talk about Gillis and kind of the directions that these pipes may head, one of those may be going that further eastward direction to kind of help fill that incremental need.

Operator46:11

Thank you. Our next caller is Jason Gableman with TD Cowen. You may go ahead, sir.

Jason Gableman46:17

Yeah. Hey, good afternoon. Thanks for taking my questions. The first one I wanted to ask was on the Bakken given the Outrigger deal has been closed for quite some time. I think you're or at least six months and Double H is close to ramping up here on the conversion. So just wondering what the strategy is on gaining volumes there and kind of securing potentially higher rates that region has to offer versus other basins.

Kim Dang46:48

I'll take that. So, one, the integration as we talked about has gone well. We're looking at incremental networking, networking bottlenecks to be able to gain further efficiencies out in the basin. But as far as it goes, as far as Highland Express goes, we just continue to work with our customers there. I don't have anything to report on that. We're making progress, but nothing for this call.

Jason Gableman47:17

Okay. And then just a maybe longer term question. You've talked a lot about the LNG growth on the US Gulf Coast and the boon it's been for your business. There is some concern that after this wave of capacity there's going to be a potential overbuild in the market and I wonder if you're in your conversations with LNG customers hearing anything around a potential slowdown in contracting or need for additional piping into future plants after this wave of capacity comes online or if your LNG customers really expect new builds to continue at pace through the decade and into the 2030s.

Richard Kinder48:05

I mean, from my perspective, we're not seeing, and you can see this from what the LNG builders are announcing, which is they continue to announce new projects and sign new contracts. And we continue to see projects get announced and projects get expanded. And I think part of the reason that you see that is it is a favorable environment right now to get projects built in the US. Number one. Number two, I think that from a trade negotiation standpoint, it helps on the balance of payments and the whole tariff discussion to take gas from the US. So to date we have not seen any slowdown in our discussions with these customers.

Tom, you might share your model that you showed the board today in terms of overall growth and worldwide demand and the US portion of it.

Tom Martin49:06

Sure. I mean as Richard alluded to in his comments, world demand is expected to grow by 25% between now and 2050 and much of that growth, actually more than 25% will be filled in our view and I think in the view from others in the market with LNG. Most of that growth as Rich said is in Asia, basically areas where they don't have production so it's going to have to be LNG that ultimately fills that hole. And what we've seen so far is that the US while the overall demand profile is growing the US market share is growing as well. So it's almost a doubling effect of the benefits of having LNG infrastructure growing in the US and I think that's for a few reasons. One, the rule of law here in the US as compared to other places around the world. There's a very advanced network within the US such that if there's ever a need to leave molecules back in the US and optimize those from a world price environment versus a domestic US environment, we have a great network of infrastructure here in the US to support that. And then I think the track record, I think the developers in the US have done an extremely good job of being successful in getting projects online timely and providing competitive rates and we have a tremendous supply resource here in the US that I think gives customers internationally a lot of comfort in knowing that there's going to be plenty of molecules behind these 20-year contracts that they signed with US developers and with customer midstream companies like us. So I think the US is in a great place to continue to grow well in north of what the overall global gas demand growth is between now and 2050. So I think that means more to come beyond what we see in the immediate line of sight of projects.

Operator51:29

Thank you. Our next caller is Brandon Bigum with Scotia Bank. You may go ahead, sir.

Brandon Bigum51:35

All right. Thanks for taking the questions. Just continuing on the LNG theme here. Could you maybe discuss some of the incremental opportunities you see maybe outside the Haynesville and concurrently, which basin or basins do you expect to be sort of next on deck to meet all of that growth that you guys have been talking about?

Kim Dang51:56

Yeah, sure. So, outside of the Haynesville, we've talked about this before. The lean Eagle Ford is going to be important. One of the key themes that's kind of coming to surface is low nitrogen. The nitrogen quality of the gas and as you think about LNG plant deficiencies, lower nitrogen equates to better production. So we think the lean Eagle Ford is going to come into play especially as it pertains to some of the Texas LNG facilities. You've obviously got the Permian. When we think about the Utica and the Marcellus, given the constrained nature of the basin it's going to be hard to get extra capacity out of there. That being said, we are evaluating some opportunities to move incremental gas out of the Utica down south using our Tennessee network. And so, that's in its early phases. It's going to take an all of the above approach because it's not just the LNG folks that are looking for molecules. It's the power demand that we just talked about and it's also the existing organic LDC and the basic power that we've been talking about since January of 2024. All of that's going to be growing and needing access to molecules. So, it's an all of the above basin approach. We've even talked about our Bakken egress project on the residue side, moving gas out west. I mean that's another example of something that's going to come into play as this demand kind of matures.

Brandon Bigum53:38

Okay, great. And then maybe just on the full year budget commentary regarding the EBITDA, reiterating the commentary there about exceeding by at least the Outrigger contribution. Could you discuss some of the areas you see outperforming expectations in 2H that sort of offset some of the lighter performance we've seen through 1H to kind of meet that expectation?

David Michels54:05

And the outperformance in the second half of the year consistent with what we've seen in the first half of the year really natural gas capacity sales, the Outrigger acquisition contributions, park and loan services on our Natural Gas Pipeline business, the Jones Act tanker contributions. Those are all some of the items that are contributing to the second half outperformance and those are consistent with what we've seen in the first half.

Kim Dang54:32

I would say there was a little bit of timing between the first quarter and the second quarter. We didn't see some of that show up in the first quarter, but out on Outrigger particularly and some of the PAL's performance as well.

Operator54:48

Thank you. Harry Mura with Barclays. You may go ahead, sir.

Harry Mura54:52

Yeah, good afternoon. David, earlier you made the point that most the expected reconciliation bill benefits come from the treatment on depreciation, which makes sense as it doesn't look like the 30% of EBIT deductibility for interest was a material constraint for KMI. Having said that, does the expanded interest deductibility cause you to rethink anything on the financing or balance sheet side moving forward to take greater advantage of those tax benefits on interest expense down the road?

David Michels55:21

No, it really, it's a good question, but no, it really doesn't. I think our financing strategy is pretty straightforward and simple. It's pretty plain vanilla. And we don't have a ton of external capital needs to fund our growth projects. We can fund $2.5 billion internally from cash flow that we generate. As that EVO continues to grow, that will continue to grow. And so, we really just use our external financing strategy to refinance our maturing bonds and this tax reform won't influence that in our view.

Harry Mura55:58

Got it. All right. Thank you.

Operator56:01

Thank you. At this time, I am showing no further questions. I'll turn the call back over to you for any closing comments. Thank you.

Richard Kinder56:08

Thank you very much. Have a good evening.

Operator56:12

Thank you. This concludes today's conference call. You may go ahead and disconnect at those times.