In its just released third quarter report, pipeline giant and terminal operator Kinder Morgan Inc. (NYSE: KMI) reported third quarter net income of $455 million, compared to $506 million in the third quarter of 2019; and distributable cash flow (DCF) of $1,085 million, a 5% decrease from the third quarter of 2019.
“We are now in the seventh month of an unprecedented reduction in energy demand due to the pandemic,” said Executive Chairman Richard D. Kinder. “Yet our company continued to produce considerable earnings and robust coverage of this quarter’s dividend.”
“Despite the on-going headwinds facing the energy sector overall, including continued low crude oil and natural gas production and reduced demand for refined products, we generated third quarter earnings per common share of $0.20, compared to earnings per common share of $0.22 in the third quarter of 2019,” said KMI President Kim Dang. “Financial contributions from our Products Pipelines and Terminals business segments were down compared to the third quarter of 2019, primarily due to lower refined products volumes as a result of the pandemic and the December 2019 sale of Kinder Morgan Canada Limited (KML). This was somewhat offset by lower interest expense versus the same period last year.”
“Terminals segment earnings were lower compared to the third quarter of 2019 predominantly driven by the impacts of the December 2019 sale of Kinder Morgan Canada Limited (KML) and demand reduction attributable to the pandemic,” said Dang. “In our liquids business, which accounts for approximately 80% of the segment, refined product volumes were down 22% compared to the third quarter of 2019, although our predominantly fixed, take-or-pay contracting profile mitigated the negative impact to earnings. Further, storage demand has remained elevated, contributing to historically-high effective utilization across our network of nearly 80 million barrels of storage capacity.”
“Our bulk business was impacted by weakness in petroleum coke and coal volumes,” he noted.
The company reported several significant developments with key terminal projects.
- Kinder Morgan has completed and placed in service the final elements in a series of projects at the Pasadena Terminal and Jefferson Street Truck Rack located on the Houston Ship Channel. The projects, totaling approximately $134 million and supported by long-term agreements, included increasing flow rates on inbound pipeline connections and outbound dock lines, tank modifications that added butane blending and vapor combustion capabilities to 10 storage tanks, expansion of the current methyl tert-butyl ether storage and blending platform, and a new dedicated natural gasoline (C5) inbound connection.
- Construction activities continue on the butane-on-demand blending system at KMI’s Galena Park Terminal. The approximately $52 million project includes construction of a 30,000-barrel butane sphere and a new inbound C4 pipeline connection, as well as tank and piping modifications to extend butane blending capabilities to 25 tanks, two ship docks, and six cross-channel pipelines. The project is supported by a long-term agreement with an investment-grade midstream company and is expected to be completed in the first quarter of 2021.
- Construction is substantially complete on an expansion of Kinder Morgan’s market-leading Argo ethanol hub. The project, which spans both the Argo and Chicago Liquids facilities, includes 105,000 barrels of additional ethanol storage capacity and enhancements to the system’s rail loading, rail unloading and barge loading capabilities. The approximately $18 million project improves the system’s inbound and outbound modal balances, adding greater product-clearing efficiencies to this industry-critical pricing and liquidity hub.
- Construction is nearing completion on a facility upgrade at the Battleground Oil Specialty Terminal Company LLC (BOSTCO) terminal, a leading fuel oil storage terminal on the Houston Ship Channel. The approximately $20 million project, which is expected to be placed in service in the fourth quarter of 2020, will add piping to allow for segregation of high sulfur and low sulfur fuel oils. KMI owns a 55% interest in and is the operator of BOSTCO.