KMI loses $637 million on non-FERC midstream impairments; PHP 75% complete

Kinder Morgan Inc. (KMI) lost $637 million in second-quarter 2020, compared with net income attributable to KMI of $518 million in second-quarter 2019. Distributable cash flow was $1 billion, an 11% decrease from second-quarter 2019. The net loss was primarily due to a $1-billion noncash impairment of goodwill associated with KMI’s natural gas midstream business not regulated by the US Federal Energy Regulatory Commission (FERC) driven by the recent sharp decline in natural gas production. Without that impairment, net income for the quarter would have been $363 million, KMI reported.

The company expects the $2.4 billion budgeted for 2020 expansion projects and contributions to joint ventures to be about $660 million lower, market conditions having caused some of the projects and ventures to no longer meet internal return thresholds.

Construction of Kinder Morgan Inc.’s (KMI) 2.1-bcfd Permian Highway (PHP) natural gas pipeline is more than 75% complete. The company expects the 430-mile, 42-in. OD pipeline to enter service early-2021. KMI also placed Train 7 of its Elba Liquefaction project in service July 17, 2020, and expects the remaining three units to begin operations before fourth-quarter 2020, bringing the plant up to its planned 2.5-million tonne/year capacity. Both projects are fully subscribed under long term, reservation-based contracts.  

KMI’s natural gas transport volumes were up 3% compared with second-quarter 2019, with the largest increases on Gulf Coast Express (GCX), Tennessee Gas Pipeline (TGP), Colorado Interstate Gas (CIG), and the Texas Intrastates. Increases on GCX were due to its being placed in service, while TGP benefited from increased LNG deliveries, CIG from growth in Denver-Julesburg basin and higher heating demand, and the Texas Intrastates from continued growth of the Texas Gulf Coast market. Natural gas gathering volumes were down 8% from second-quarter 2019 due primarily to decreased volumes on KMI’s KinderHawk, Oklahoma, and Hiland Midstream systems.

Crude and condensate pipeline volumes were down 26% and total refined product volumes 31% compared with second-quarter 2019.

Construction continues on KMI’s $260-million expansion projects designed to increase the delivery capacity on its Texas intrastate system by 1.4 bcfd. This expansion will serve future LNG, industrial, electric generation, and local distribution company expansions along the Texas Gulf Coast. Construction of the expansion projects is on schedule and they are expected to be placed in service fourth-quarter 2020.

On June 30, 2020, TGP filed an application with FERC requesting a certificate order authorizing its East 300 Upgrade project. TGP has entered into a long-term, binding agreement with Consolidated Edison Company of New York Inc. to provide 115 MMcfd of capacity to its distribution system. The $246-million expansion project involves upgrading and adding compression on TGP’s system. Pending receipt of all required permits, construction will begin in March 2022 with an expected in-service date of Nov. 1, 2022.

On May 8, 2020, Kinder Morgan received regulatory approval to proceed with an open season on its Mier-Monterrey Pipeline system in Mexico that began on July 13, 2020, and will conclude on Aug. 7, 2020. The $22-million project involves expanding the system’s capacity by 35 MMcfd, and is substantially anchored by a long-term, binding agreement of 31 MMcfd. The project is expected to be in service second-quarter 2021.

Construction is progressing on Natural Gas Pipeline Co. of America’s (NGPL) Sabine Pass Compression project, which is expected to be complete by Oct. 1, 2020. The $68-million project (KMI’s share $34 million), supported by a long-term take-or-pay contract, will add compression capacity on NGPL’s Louisiana system to deliver additional natural gas to Cheniere Energy Inc.’s Sabine Pass liquefaction plant in Cameron Parish.

Work has begun on NGPL’s Gulf Coast Southbound project. The $220-million project (KMI’s share $110 million) will increase southbound capacity on NGPL’s Gulf Coast System by 300 MMcfd to serve Corpus Christi Liquefaction LLC. The project is supported by a long-term take-or-pay contract and is expected to enter service first-half 2021.

Construction is also underway on NGPL’s $52-million Lockridge-to-Waha Project (KMI’s share $26 million). The project will enable NGPL to deliver as much as 500 MMcfd to the Waha Hub via an extension of its Amarillo system, and is supported by long-term take-or-pay contracts. The extension is expected to be placed in service early fourth-quarter 2020.