Kinder Morgan has published its Q3 results for 2020, including a net income of US$455 million (€385 million), down US$51 million on the same period in 2019 and given various terminal project updates.
Overall earnings from the products and pipelines, and terminals business segments have dropped compared to Q3 2019, which Kinder Morgan president Kim Dang blamed on the ongoing COVID-19 pandemic and the sale of Kinder Morgan Canada in December 2019.
‘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 utilisation across our network of nearly 80 million barrels of storage capacity,’ said Dang.
Kinder Morgan has completed US$134 million worth of projects at its Pasadena Terminal and Jefferson Street Truck Rack located on the Houston Ship Channel, including increasing flow rates on inbound pipeline connections and outbound dock lines, tank modifications that added butane blending and vapour 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.
The company has almost completed work on the Argo ethanol hub, with work spanning the Argo and Chicago Liquids facilities. Kinder Morgan is adding 105,000 bbl of ethanol storage capacity and improving the rail loading, rail unloading and barge loading capabilities at a cost of US$18 million.
Kinder Morgan says that construction is also nearing completion on a US$20 million facility upgrade at the Battleground Oil Specialty Terminal Company LLC (BOSTCO) terminal, in which it has a 55% operating interest. The project is adding piping to segregate high- and low-sulphur fuels, which should enter service in Q4 2020.
Construction work on the US$52 million butane-on-demand blending system at the Galena Park Terminal is ongoing. The project, which 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, includes 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.
Despite the overall drop in income for Kinder Morgan as a whole, the directors approved a dividend of US$0.2625 per share, a 5% increase on Q3 2019. Executive chairman Richard Kinder says that the company has continued to generate substantial cash.
‘We are now in the seventh month of an unprecedented reduction in energy demand due to the pandemic, yet our company continued to produce considerable earnings and robust coverage of this quarter’s dividend,’ he says.
CEO Steve Kean praised the efforts of staff in adapting to new working conditions and said that the company had successfully reduced its 2020 expenses and sustaining capital expenditures, freeing up US$175 million. This has allowed the company to spend on necessary COVID-19 protection measures. Kinder Morgan has also reduced net debt by US$10 billion since Q3 2015, increasing resiliency.
Some planned expansion projects have been dropped due to market conditions meaning that they are no longer needed or don’t meet return thresholds, so Kinder Morgan has lowered its expansion budget. It expects that its borrowing capacity, cash on hand and cash from operations are ‘more than adequate’ for its 2021 cash requirements.