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Kinder Morgan (KMI) Releases Initial Financial Projections


Kinder Morgan, Inc. KMI released preliminary financial projections for 2019.

The company expects strong performance in 2019 with distributable cash flow expected to grow 10% to $5 billion. The upside will be supported by a backlog of $6.5 billion comprising energy infrastructure expansion opportunities. Some projects that are expected to be commissioned in 2019 include the Elba Liquefaction Project and Gulf Coast Express.

Despite the sale of the Trans Mountain asset in 2018, the company expects to generate DCF of $2.20 per share and $7.8 billion of adjusted EBITDA, up 7% and 4% from 2018 budget, respectively.

The company is also believed to return additional value to shareholders through 2019 as announced earlier in 2017. For 2019, Kinder Morgan projects to enhance the declared dividend per common share to $1.00 per share (annualized), beginning with $0.25 per share for the first quarter of 2019, up 25% from the 2018 dividend and 100% from the 2017 dividend. The dividend hike is likely to continue through 2020, which is expected to reach $1.25 per share (annualized).

For 2019, Kinder Morgan intends to invest $3.1 billion in expansion projects and contributions to joint ventures. The dividends are expected to be fully funded by internally generated cash flow. A significant chunk of the company’s 2019 discretionary spending will also be funded by internal cash flow, which will negate the need to access equity markets. The company expects to exit 2019 with a 4.5x net debt-to-adjusted EBITDA ratio. Kinder Morgan’s effort places it well for an upgrade of credit ratings and already is on positive outlook at all three rating agencies.

Kinder Morgan’s projections have assumed average annual prices for West Texas Intermediate (WTI) crude oil and Henry Hub natural gas of $60.00 per barrel and $3.15 per MMBtu, respectively. The figures are in line with forward pricing during the budget process. Since bulk of cash generated by the company is fee-based, it is not directly exposed to commodity prices. Kinder Morgan has commodity price sensitivity primarily in the CO2 segment, where it hedges the majority of next 12 months’ worth oil production to reduce the sensitivity. For 2019, the company projects that every $1 per barrel change in the average WTI crude oil price will impact DCF by about $9 million. Also, each 10 cents per MMBtu change in the price of natural gas is expected to impact DCF by about $1 million.

Zacks Rank & Other Key Picks

Currently, Kinder Morgan carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Eni SpA E, Enterprise Products Partners L.P. EPD and SunCoke Energy, Inc SXC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rome-based Eni is among the leading integrated energy players in the world. The company delivered an average positive earnings surprise of 16.7% in the last four quarters.

Headquartered in Houston, TX, Enterprise Products Partners is among the leading midstream energy players in North America. It pulled off an average positive earnings surprise of 9.3% in the last four quarters.

SunCoke acquires, owns and operates the coke making and coal mining operations. The company delivered an average positive earnings surprise of 302.6% in the last four quarters.

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