Kinder Morgan Q3 2026 Earnings: Record Results and $14.4B Backlog Extend the Growth Runway

Kinder Morgan reported third-quarter revenue of $4.53B, up from $4.15B a year earlier, while GAAP EPS increased 21% to $0.34 and adjusted EPS also rose 21% to $0.35. Adjusted EBITDA grew 9% to $2.18B, supported by contributions from all four operating segments.

The larger investment development was the sharp expansion of Kinder Morgan’s project backlog to $14.4B, including $13.2B of natural-gas projects. The newly sanctioned Southeast Connector and Permian Link projects push a meaningful portion of future growth into 2030 and beyond, though the long construction timelines mean current earnings momentum and project execution will both matter.

Earnings Snapshot

The Bigger Story

Kinder Morgan’s quarterly earnings were strong, but the most consequential development was the conversion of its natural-gas opportunity pipeline into sanctioned projects. The company added $5.4B of projects to backlog during the quarter, net of $700M placed into service, bringing the total backlog to $14.4B.

Natural gas accounts for $13.2B of that backlog. More than 75% of the total backlog is tied to projects serving power generation and local distribution company demand, increasing the company’s exposure to the expected growth in electricity demand and LNG-related gas transportation.

The two largest additions were Southern Natural Gas’ Southeast Connector and NGPL’s Permian Link. Kinder Morgan’s share of the Southeast Connector is expected to be about $3.1B, while its share of Permian Link is about $1.6B. Both are supported by long-term take-or-pay transportation contracts, according to management.

The trade-off is timing. Permian Link is expected to enter service in the third quarter of 2030, while Southeast Connector is expected to enter service in phases beginning in the fourth quarter of 2030 and continuing through 2032. These projects improve long-term earnings visibility, but they do not solve the question of how evenly EBITDA growth will progress between 2027 and the major project start dates.

Revenue and Operating Performance

Revenue increased by roughly 9% year over year to $4.53B. Operating income rose to $1.16B from $1.06B, reflecting higher segment contributions, although higher costs of sales and operating expenses absorbed much of the revenue increase.

Natural Gas Pipelines remained the principal contributor. Adjusted segment EBDA increased to $1.49B from $1.40B, supported by higher contributions from El Paso Natural Gas, KinderHawk, Tennessee Gas Pipeline, and the Texas Intrastate system.

Natural-gas transport volumes rose 3%, driven primarily by higher LNG feed-gas deliveries on Tennessee Gas Pipeline and greater demand on the Texas Intrastate network. Gathering volumes rose 14%, led by a 40% increase on the KinderHawk system in the Haynesville basin. Those trends support management’s view that power generation, LNG exports, and industrial demand are increasing the value of its existing network as well as creating expansion opportunities.

Products Pipelines had mixed operating trends. Total refined-products volumes declined 3%, while crude and condensate volumes fell 11%. Management attributed more than half of the crude-volume decline to the prior conversion of the Double H pipeline to natural-gas-liquids service, with the remainder tied to fewer well connections at Hiland Crude.

Despite weaker volumes, Products Pipelines adjusted segment EBDA rose to $313M from $288M, helped by favorable commodity pricing and higher butane blending activity. Reported segment EBDA, however, fell to $172M from $288M because of $138M in legal, environmental, and other accruals classified as Certain Items.

Terminals adjusted segment EBDA increased 15% to $314M. The improvement reflected contributions from completed expansion projects, higher commodity prices, stronger coal and petroleum coke handling, and higher Jones Act tanker rates. Bulk transload tonnage increased to 13.5 million tons from 11.5 million tons, while liquids utilization declined to 92.6% from 94.6%.

Management said export-terminal activity was particularly strong, with 427,000 barrels per day moving across its 11 Houston Ship Channel docks, up 39% from the prior year and a quarterly record. Its Jones Act fleet was fully leased for the remainder of 2026, 97% leased through 2027, and 80% leased through 2028, assuming likely customer options are exercised.

CO2 adjusted segment EBDA rose 35% to $184M, aided by higher commodity prices and production. Net oil production increased 8%, including an 11% increase at SACROC, while NGL sales volumes rose 9%.

Profitability and Margins

Net income attributable to Kinder Morgan increased 22% to $764M. The company’s GAAP EPS rose to $0.34 from $0.28, while adjusted EPS increased to $0.35 from $0.29.

Adjusted EBITDA increased 9% to $2.18B. The lower growth rate relative to EPS reflects the effects of interest expense, taxes, depreciation, and specific non-operating items. Net interest expense declined to $430M from $456M, helping earnings growth.

Adjusted earnings also require some context. Kinder Morgan recorded $138M of legal, environmental, and other accruals during the quarter, primarily affecting Products Pipelines. This was partly offset by a $71M gain on the sale of certain Terminals assets and by tax-related adjustments. The net impact of all Certain Items was $28M.

Management also identified approximately $400M of 2026 outperformance versus budget from factors that may not recur. These included Winter Storm Fern and extended Northeast cold weather, a Terminals contract buyout, a favorable FERC rate true-up, and an unusually favorable Waha-to-Houston Ship Channel spread. Those items contributed about $225M, while commodity prices added another $175M relative to the company’s budget assumptions.

That disclosure is important for investors assessing the durability of the company’s 2026 earnings strength. The underlying businesses are growing, but not all of this year’s budget outperformance should be treated as a recurring run rate.

Demand, Customers and Pricing

Kinder Morgan’s growth strategy is increasingly centered on demand-pull gas infrastructure rather than solely on production-basin takeaway capacity. The Southeast Connector is designed to transport up to 2.6 Bcf per day into southeastern markets, with potential expansion to roughly 3.5 Bcf per day if additional customer commitments materialize.

The project includes approximately 470 miles of new pipeline and related compression infrastructure. Management said it has enough signed customer commitments to proceed, while additional binding commitments under negotiation could support a larger project scope.

Permian Link is designed to provide about 2.8 Bcf per day of transportation capacity through approximately 434 miles of pipeline and related infrastructure. The project will serve new power generation for an A-rated hyperscaler and is supported by long-term take-or-pay agreements. Management also said the project has room for future expansion through added compression and potential additional shippers.

Kinder Morgan continues to see further opportunities beyond the reported backlog. Its TGP 219 South project received more than 2 Bcf per day of interest during a non-binding open season. Management suggested a roughly $1.5B initial project could be developed around brownfield infrastructure, though the ultimate scope will depend on customer commitments and could be larger if volumes approach 2 Bcf to 3 Bcf per day.

What is Kinder Morgan’s outlook for 2026?

Kinder Morgan’s formal 2026 budget calls for:

• ·Net income attributable to KMI of $3.1B
• ·Adjusted EPS of $1.36
• ·Adjusted EBITDA of $8.6B
• ·Declared dividends of $1.19 per share
• ·Year-end net debt-to-adjusted EBITDA of 3.8x

Management now expects adjusted EBITDA to be more than 6% above its budget and adjusted EPS to be more than 13% above budget for the full year. It also expects year-end leverage of 3.6x, better than the 3.8x target embedded in the original budget.

Management did not provide a formal 2027 outlook. It cautioned that several favorable 2026 factors, particularly weather-related gains and certain commercial items, are unlikely to recur at the same level. It nevertheless said the underlying business remains strong and that its backlog supports growth over the next three to five years, although the contribution will not be evenly distributed by year.

Management expects capital spending to run at roughly $4B annually over the next several years. This would be a notable increase relative to recent spending levels and reflects the larger backlog.

Balance Sheet, Cash Flow and Capital

Kinder Morgan ended the quarter with $918M of cash and cash equivalents, up from $63M at year-end 2025. Net debt was $32.23B, compared with $31.72B at year-end, but the leverage ratio improved to 3.5x from 3.8x because trailing adjusted EBITDA increased to $9.19B.

Cash flow from operations rose to $1.59B in the quarter and $5.04B over the first nine months. Capital expenditures totaled $1.05B in the third quarter and $2.83B year to date. Free cash flow was $545M for the quarter, but free cash flow after dividends was negative $120M as the company continued to prioritize growth investment and shareholder distributions.

Management said year-to-date capital spending, including growth, sustaining investment, and joint-venture contributions, was about $3.07B. The company also spent about $500M on the Monument acquisition during the year.

Kinder Morgan issued $1.15B of 5.55% senior notes due 2036 and $600M of 6.15% senior notes due 2056 in August. The proceeds were used to repay commercial paper and maturing debt and for general corporate purposes.

The balance sheet remains within management’s target range, but higher spending requirements and the multiyear construction schedules of the new projects make capital allocation and leverage discipline central issues.

What Investors Should Watch

1. Execution on Southeast Connector and Permian Link

These two projects account for a substantial share of the new backlog and are expected to begin contributing only in 2030 or later. Permitting, construction costs, customer commitments, and project phasing will determine whether the expected returns are achieved.

2. The pace of backlog conversion

Kinder Morgan added $5.4B of projects in one quarter, but investors should watch whether it can continue converting its broader opportunity set into contracted, sanctioned projects. TGP 219 South and potential expansions around Southeast Connector are early indicators.

3. Underlying earnings growth after 2026 tailwinds fade

Management identified roughly $400M of favorable 2026 budget outperformance tied to weather, commercial items, rate true-ups, spreads, and commodity prices. Investors should separate recurring segment growth from these temporary benefits.

4. Capital spending and free cash flow after dividends

Management expects roughly $4B of annual capital spending over the next several years. The company has balance-sheet capacity, but sustained negative free cash flow after dividends would increase reliance on debt, joint-venture financing, or other funding sources.

5. Natural-gas demand realization

The backlog is heavily exposed to power generation, LNG exports, and local utility demand. The central commercial question is whether customer demand develops on the timelines assumed in the company’s projects and whether additional supply infrastructure can be built to support it.

AlgovestIQ Takeaway

Kinder Morgan produced a strong third quarter, with revenue growth, 21% growth in GAAP and adjusted EPS, and positive adjusted earnings growth across all four segments. The company also improved leverage despite elevated capital expenditures and maintained its dividend growth policy.

The more important change in the investment case is the $14.4B project backlog. Southeast Connector and Permian Link materially extend the company’s visible growth runway beyond the nearer-term projects that had previously dominated its expansion program. The long-term contracts supporting these projects improve revenue visibility relative to more commodity-sensitive growth opportunities.

However, the quarter also demonstrates why investors should be careful about extrapolating 2026 results. Management attributed a meaningful portion of budget outperformance to weather, commodity pricing, a contract buyout, regulatory rate items, and favorable market spreads. Those benefits may not recur, and management has indicated that 2027 growth may not match the unusually strong 2026 performance.

The central investment question is therefore shifting from whether Kinder Morgan can find large natural-gas projects to whether it can execute a much larger capital program while sustaining leverage discipline, dividend coverage, and reliable returns. Continued backlog additions, timely permits, stable project costs, and a growing contribution from existing gas infrastructure would strengthen that case. Delays, rising capital needs, or a sharper-than-expected normalization in underlying earnings would weaken it.