Which Segment Likely Drove Kinder Morgan’s 3Q16 Earnings?

KMI’s Natural Gas Pipelines segment

Kinder Morgan (KMI) operates through five reportable segments. Natural Gas Pipelines is its largest business segment in terms of EBDA (earnings before depreciation and amortization). In 2Q16, the segment accounted for 54% of the company’s total EBDA.

The segment’s 3Q16 EBDA might be negatively impacted by the 50% sale of its SNG (Southern Natural Gas) pipeline system. The transaction closed on September 1, 2016.

Which Segment Likely Drove Kinder Morgan’s 3Q16 Earnings?

In 2Q16, the segment’s EBDA rose nearly 4.0% year-over-year due to an increased contribution from the segment’s Tennessee Gas Pipeline. The contribution was driven by expansion projects and improved performance on the acquired Hiland midstream assets.

CO2 segment’s EBDA fell

The above graph shows the segmental contribution to KMI’s EBDA over the last six quarters. KMI’s CO2 segment reported EBDA of $203 million in 2Q16, which was 15.0% lower than the $240 million for 2Q15. The performance was largely impacted by lower commodity prices.

WTI (West Texas Intermediate) prices averaged $44.80 per barrel in 3Q16 compared to an average of $46.60 in the year-ago quarter. So the impact of lower prices on a year-over-year basis should be slight in 3Q16.

Terminals segment

EBDA for KMI’s Terminals segment rose 4.7% in 2Q16 compared to 2Q15. The rise was driven by strong growth at its liquids terminals, which account for more than three-fourths of the segment’s business. The growth was driven primarily by expansion projects, which should also contribute to the segment’s EBDA in 3Q16.

Other segments

In 2Q16, EBDA for KMI’s Products Pipelines segment rose 5.8% year-over-year. EBDA for Kinder Morgan’s Canada segment rose 8.1% compared to 2Q15.

Enterprise Products Partners (EPD) and Plains All American Pipeline (PAA) are scheduled to report their 3Q16 results on October 27, 2016, and November 2, 2016, respectively.