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Kinder Morgan’s 1Q17 Net Income Falls 9%, Misses Estimates

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Kinder Morgan’s 1Q17 Net Income Falls 9%, Misses Estimates PART 3 OF 4

Why Kinder Morgan’s Earnings Fell in 1Q17

KMI’s Natural Gas Pipelines segment

Kinder Morgan’s (KMI) operations have five reportable segments. The Natural Gas Pipelines segment is Kinder Morgan’s largest business unit in terms of EBDA (earnings before depreciation and amortization). In 1Q17, this segment accounted for 54% of the company’s total EBDA.

The chart below shows the segmental contribution to KMI’s EBDA over the last nine quarters. The EBDA for KMI’s Natural Gas Pipelines segment fell 10% year-over-year.

Why Kinder Morgan’s Earnings Fell in 1Q17

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During the company’s 1Q17 announcement, KMI’s president and CEO, Steve Kean, noted, “The Natural Gas Pipelines segment’s performance for the first quarter of 2017 was impacted by the third quarter 2016 sale of a 50 percent interest in SNG, declines attributable to reduced volumes affecting certain of our midstream gathering and processing assets, and a negative impact on our Colorado Interstate Gas Company (CIG) pipeline tariff rates as a result of a rate case settlement reached during 2016.”

KMI’s CO2 segment

In 1Q17, KMI’s CO2 segment reported a 1% year-over-year fall in EBDA. The segment’s performance was impacted by slightly lower commodity prices.

Other segments

KMI’s Products Pipelines and Terminals segments’ EBDA multiples increased 1% and 9%, respectively, in 1Q17 over 1Q16. The EBDA growth in its Terminals segment was mainly driven by contributions from expansion projects.

The company’s Kinder Morgan Canada segment, however, reported a 7% decrease in its 1Q17 EBDA. The company noted in its 1Q17 results announcement that the decline was partly driven by a 17% “decrease in volumes to Washington state, caused by narrowing price differentials with competing sources.”

Kinder Morgan’s peer Enterprise Products Partners (EPD) is scheduled to report its 1Q17 results on May 2, 2017.

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