Kinder Morgan (KMI) Q3 2026 earnings review
Kinder Morgan's project backlog jumps 50%, and profit rises 21%
Kinder Morgan, the operator of natural gas and fuel pipelines across North America, signed its largest wave of construction contracts in decades while raising its full-year profit target again. Third-quarter revenue rose 9% from a year ago, and profit per share excluding one-offs climbed 21% as natural gas volumes grew. Chief executive Kim Dang lifted the full-year earnings plan for a third straight quarter, though by our math the new floor still points to a slight earnings drop in the fourth quarter.
| Revenue | $4.53B +9.3% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $0.35 +21% from a year ago |
| Approved project backlog | $14.4B up $4.7B from last quarter |
| Full-year EBITDA outlook | Raised >6% above budget (>5% prior) |
⚖️ Verdict: 🟢 Bullish
The story got better because Kinder Morgan answered the main doubt from last quarter — a shrinking project backlog — by adding $5.4 billion of contracted pipelines for power plants and data centers. That brings the approved backlog to a record $14.4 billion and locks in growth through 2030. One caution: higher construction spending and a $138 million legal charge in fuel pipelines pushed third-quarter cash flow after dividends into a $120 million deficit.
The question now is whether Kinder Morgan can fund this $14.4 billion construction wave entirely from its own cash flow without raising debt ratios. Bulls point to the 3.5x leverage ratio and rising gas fees, while sceptics note that cash after dividends is already tight before spending peaks on the new 2030 pipelines. Management's 2027 capital budget in December will settle it.
🐂 Bull Case
Two Giant Gas Pipelines Lift the Backlog 50%
Kinder Morgan's expansion backlog — approved construction projects with signed customer contracts — shrank by $500 million last quarter, raising doubts about how fast the pipeline operator could sign new deals. This quarter erased that worry, as the company added $5.4 billion of new projects and lifted the total backlog by $4.7 billion to a record $14.4 billion.
Two pipelines drove the jump: the Southeast Connector, which will ”deliver abundant Marcellus/Utica supply to the Southeast, one of the fastest growing demand centers in the country”, and the Permian Link in Texas. Chief executive Kim Dang said the two lines ”will be among the largest natural gas pipeline projects to be constructed in decades”.
- Southeast Connector: $3.1 billion for Kinder Morgan's share, carrying up to 2.6 billion cubic feet per day (Bcf/d) starting in late 2030
- Permian Link: $1.6 billion for Kinder Morgan's share, carrying 2.8 Bcf/d to serve ”new power generation for an A-rated hyperscaler” in late 2030
- Power plants and local utilities: now account for more than 75% of the backlog, up from 60% last quarter
- Expected project return: construction cost of 5.7 times first-year project EBITDA (earnings before interest, taxes, depreciation and amortization)
Because customers sign take-or-pay contracts — paying for pipeline space whether they use it or not — these additions lock in multi-year cash growth through 2030. What to watch: management's update on the remaining pool of unapproved projects on the conference call. A number near $10 billion would show that signing $5.4 billion did not empty the pipeline of future deals.
Third Outlook Raise Still Leaves a Cautious Fourth Quarter
Kinder Morgan sets an annual budget each December and updates investors during the year on how far results are running ahead of that plan. For the third quarter in a row, the energy infrastructure company raised its full-year outlook, lifting its expected EBITDA, excluding one-offs, to more than 6% above budget and profit per share to more than 13% above budget.
Even after three raises, the new floor is easy to clear. Over the first nine months of 2026, EBITDA excluding one-offs grew 13% from a year ago to $6.92 billion, and profit per share excluding one-offs rose 32% to $1.20. By our math, the new full-year floors require only $2.20 billion of EBITDA and $0.34 per share in the fourth quarter — down 3.2% and 13.6% from a year ago.
Last year the fourth quarter was a high bar because of asset sales and winter weather, so growth will slow on the comparison alone. Still, natural gas transport volumes rose 3% this quarter and gathering volumes rose 14%, so the business is not shrinking. What to watch: fourth-quarter EBITDA against the $2.20 billion implied floor. Beating it will confirm that the outlook remained conservative all year.
Haynesville Gathering Grows 14% Ahead of New Capacity
Gathering pipelines collect natural gas from production wells and move it to processing plants and larger transmission lines. Kinder Morgan's gathering volumes rose 14.4% from a year ago to 4,722 billion British thermal units per day (BBtu/d), led by its KinderHawk network in the Haynesville shale basin of Louisiana. That follows a 25.6% jump in the second quarter on a restated basis.
The company has been running its Haynesville pipes near full capacity, forcing it to hand off extra gas to third-party systems at lower profit margins. To keep that profit in-house, Kinder Morgan is finishing the Plantation North expansion on KinderHawk, a project costing more than $500 million that enters service by the end of 2026.
Alongside rising liquefied natural gas (LNG) export deliveries on the Tennessee Gas Pipeline, higher gathering volumes lifted earnings in the natural gas segment by 6.1% to $1.49 billion. What to watch: on-time completion of the Plantation North expansion in the fourth quarter. Once the pipe opens, Kinder Morgan will capture full fees on gas that is already flowing.
🐻 Bear Case
Refined Product and Crude Volumes Keep Falling
While the natural gas network is booming, volumes on Kinder Morgan's liquid fuel pipelines fell for a fifth consecutive quarter. President Dax Sanders said refined fuel volumes dropped 3.4% from a year ago because of higher fuel prices, while crude oil and condensate volumes fell 10.7% due to ”lower gathered volumes in the Bakken and the conversion of our Double H pipeline to natural gas liquids service”.
To capture shifting fuel flows in the West, the company and partners Phillips 66 and HF Sinclair ”reached a final joint venture agreement and reached a final investment decision to move forward with the proposed Western Gateway Pipeline”. Kinder Morgan will own 35.1% of the 1,300-mile system, which will carry up to 230,000 barrels per day to Arizona and California starting in 2029.
However, the company still has not disclosed what Western Gateway will cost to build or how much volume it will pull away from Kinder Morgan's existing California-bound pipelines. What to watch: disclosure of Kinder Morgan's dollar share of Western Gateway construction costs. Without the price tag and net earnings effect, investors cannot judge the return on the partnership.
Legal Accruals and Higher Project Spending Weigh on Cash
Kinder Morgan strips out ”Certain Items” — charges management views as outside normal operations — when it reports its headline segment numbers. In the Products Pipelines division, higher fuel prices helped underlying operations, but Sanders noted those gains were ”more than offset by legal, environmental, and other expense accruals” totaling $138 million. On a reported basis, the segment's earnings dropped 40.3% from a year ago to $172 million.
Those legal and environmental charges also pushed company-wide operations and maintenance costs up by 2.0 percentage points of revenue, to 20.9%. Excluding the $138 million charge, by our math, operations and maintenance costs fell 1.1 percentage points of revenue. At the same time, capital spending on pipelines rose 31.8% from a year ago to $1.05 billion as the big backlog moved into construction.
Because construction spending rose faster than operating cash flow, third-quarter free cash flow fell 12.2% to $545 million, leaving a $120 million cash shortfall after paying $665 million in dividends. What to watch: full-year free cash flow after dividends in the fourth quarter. With $226 million left over after nine months, another quarter of heavy building could consume the remaining cash buffer.
Risks this quarter didn't answer
Several standing questions from prior quarters depend on conference call commentary or the quarterly regulatory filing and were not answered in the earnings release.
- Federal permits for Mississippi Crossing and South System Expansion 4: expected in July, but the release gave no update on whether regulators issued the certificates.
- Equipment lead times: no update on whether longer delivery times for turbines and compressors are pressuring 2028 to 2030 completion dates.
- Unapproved project pool: no update on whether the $10 billion-plus pool of potential deals shrank after $5.4 billion moved into the approved backlog.
- Oil and gas price exposure: higher oil and natural gas liquids prices boosted the CO2 segment by 35.3%, while crude hedge volumes drop from 23.15 thousand barrels per day in 2026 to 13.30 in 2028.
💲 Other KPIs
Combined earnings before depreciation and amortization (EBDA) for the two smaller segments rose 21.5% from a year ago by our math. Terminals grew 14.6% to $314 million on higher tanker rates and new storage projects, while the CO2 segment rose 35.3% to $184 million as oil production at the SACROC field climbed 11%.
Net debt — total debt minus cash and currency adjustments — edged up 1.6% from the end of 2025 as the pipeline group funded its acquisition and construction program. In August, the US company issued $1.75 billion of senior notes due in 2036 and 2056 to pay down short-term borrowing, bringing net debt to 3.5 times trailing 12-month EBITDA.
Weighted average shares rose 0.1% from a year ago (2,227 million vs 2,224 million). Kinder Morgan did not buy back stock during the quarter, routing its cash flow instead into pipeline construction and a quarterly dividend of $0.2975 per share, which is up 2% from last year.
🔮 Guidance
Raised. Management lifted the floor by at least $86 million by our math, to at least 8.6% growth over 2025. It is the third raise this year, and each step has been smaller than the last: +$258M, +$172M, +$86M. By our math, the floor leaves $2.20 billion for the fourth quarter, down 3.2% from last year's record fourth quarter.
Raised. The new floor sits at least 18.2% above 2025 profit per share excluding one-offs, up by about $0.014 from last quarter's target by our math. That leaves about $0.34 per share for the fourth quarter, down 13.6% from $0.39 a year ago, as the company laps a strong prior-year finish.
Unchanged. Kinder Morgan still expects to finish the year with net debt at 3.6 times EBITDA, 0.2 times better than its original budget of 3.8 times. Because the ratio already sits at 3.5 times at the end of September, the plan builds in room for fourth-quarter construction spending.
Unchanged. The board approved the third-quarter payment of $0.2975 per share, keeping the full-year payout on track for $1.19, a 2% increase over 2025.
❓ Key Questions
What will the Western Gateway pipeline cost Kinder Morgan?
Kinder Morgan took a 35.1% stake in the 1,300-mile refined fuel project with Phillips 66 and HF Sinclair, but it has not disclosed the total construction cost or how much profit the new line will take from its existing California pipelines.
How large is the unapproved project pool after Q3?
Management previously cited more than $10 billion of potential projects in development. Investors need to know whether moving $5.4 billion into the approved backlog this quarter shrank that opportunity pool or if new power-plant inquiries refilled it.
What caused the $138 million legal and environmental charge?
The accrual wiped out 40% of reported third-quarter earnings in the Products Pipelines segment. The release did not specify whether the charge settles a known lawsuit or reflects new environmental cleanup costs.
How will Kinder Morgan fund its multi-year building peak?
With the backlog now at $14.4 billion and third-quarter free cash flow falling $120 million short of the dividend, annual construction spending could climb well above $3 billion in 2027 through 2029, testing the company's pledge to self-fund its growth.