Kinder Morgan outperformed its distributable cash flow guidance in 2018 by 6% on an annual basis last year, rising just above $4.7 billion. The company's adjusted EBITDA rose to $7.6 billion in 2018, up 5% on an annual basis.
Rising cash flow generation is how Kinder Morgan planned to fund dividend increases while still investing billions into growing its asset base.
To further ensure that its capital is being put to good use, Kinder Morgan targets opportunities with very favorable macro dynamics, Seeking Alpha reported. Even before taking long-term agreements into account, the company wants to only invest in projects that are sure to sport high utilization rates (calculated bets versus taking big risks). A prime example of this is when midstream firms, like Kinder Morgan, add pipeline takeaway capacity in plays that are desperately in need of transportation options (like natural gas pipelines down in the Permian Basin or up in Appalachia).
In January 2018, the Utopia Pipeline came online and started carrying 50,000 bpd of ethane produced in Appalachia up to Canada's petrochemical hub in Ontario. During the Fall of 2018, Kinder Morgan began placing its Broad Run Expansion Project into service which expanded the capacity of its enormous Tennessee Gas Pipeline by enabling more Appalachian-produced natural gas to reach markets in the Deep South.
Kinder Morgan turned the first phase of the Gulf Coast Southbound Project online in October, which expanded the capabilities of its NGPL (Natural Gas Pipeline Company of America) to transport additional natural gas supplies to meet rising Gulf Coast demand (particularly from LNG exporters, refineries, petrochemical plants, and utilities).
Part of Kinder Morgan's cash flow outperformance was also due to stronger-than-expected oil prices for most of the year, as the firm produces crude oil through upstream enhanced oil recovery operations (specifically, by injecting CO2 into the ground to recover crude from old fields).
Looking ahead
The Elba Island LNG facility is expected to come online this quarter or possibly early next quarter. Kinder Morgan specifically mentions "the end of Q1 2019" when referring to the start-up date, but any delays could easily push that into Q2 2019.
That being said, the project is nearly complete and represents one of the firm's bigger growth catalysts over the medium-term. As all ten liquefaction trains are brought online over the coming quarters, Kinder Morgan should continue to post steady increases in its cash flow generation.
Furthermore, Kinder Morgan brought the SNG Fairburn Expansion (enables the SNG system to route more gas to Southeast US markets), the Sabine Pass Expansion (expands delivery capacity to the Sabine Pass LNG export terminal), and the Lone Star (expands delivery capacity to the Corpus Christi LNG export terminal) projects online in December 2018, Seeking Alpha reported.
These projects combined cost almost half a billion dollars to bring online. Expanding its ability to deliver natural gas to Cheniere Energy, Inc.'s Sabine Pass and Corpus Christi LNG export terminals represents a big part of its growth trajectory this year and in the future, as Cheniere is still turning new LNG trains online at both facilities.
Later on this year, Kinder Morgan's next big growth catalyst will be commencing commercial operations at the Gulf Coast Express Pipeline. Management is calling for an October 2019 start-up date, with construction activities currently underway. That pipeline will have the capacity to transport 1.98 Bcf/d of natural gas from the Permian Basin to Gulf Coast markets. Kinder Morgan owns 35% of the project and is the operator of the endeavor.
