LNG

Kinder Morgan Inc., the US pipeline giant transporting natural gas to LNG plants and to customers around America, gave a fourth-quarter conference call describing its performance with Executive Chairman Richard D. Kinder saying there was “a long runway for fossil fuels, especially natural gas” in the nation.

KMI had reported net income of $637 million compared with $607M in the same three months of 2020 with distributable cash flow of $1.09 billion compared with $1.25Bln in the fourth quarter of 2020.

Adjusted earnings were $609M for the quarter versus $604M in the fourth quarter of 2020.

“Our assets once again generated robust adjusted earnings and strong coverage of this quarter’s dividend,” said KMI Executive Chairman Richard D. Kinder.

“The company provides our investors with dependable value grounded on stable cash flows and a time-honored corporate philosophy: fund our expansion capital opportunities internally, maintain a healthy balance sheet, and return excess cash to our shareholders through dividend increases and/or share repurchases,” stated the Executive Chairman.

“In short, there is a long runway for fossil fuels and especially natural gas. Investing in the energy sector has been very lucrative recently with the energy sector, the best-performing of the S&P 500 (top stocks) during 2021,” Kinder explained.

“We expect that favorable view to continue in 2022, and the year has started out that way,” he added.

“Within the energy segment, I would argue that midstream pipelines are a good way of playing this trend. They generally have less volatility and less commodity exposure than upstream and most have solid and growing cash flow underpinned by contracts to a large extent with their shippers. We believe KMI is a particularly good fit for investors,” he declared.

Payments

“We paid down over $12Bln in debt since 2016 and 2022 marks the fifth consecutive year we have increased our dividend, growing it over those years from $0.50 per share to $1.11 per share,” he told analysts in the conference call.

KMI Chief Executive Steve Kean stated in his contribution that he was especially proud of his more than 10,000 KMI co-workers who “remained laser-focused on safety, operational excellence, and customer service” the past three months.

“We closed out 2021 as a record year financially, beginning with our outstanding commercial and operational performance during Winter Storm Uri,” added Kean.

“As we complete our 25th year, future prospects for the company look very bright. Our business model, predominantly take-or-pay and fee-based, long-term contracts with creditworthy customers, remains durable,” explained the CEO.

“Our interconnected network of transportation and storage infrastructure is now recognized as even more valuable in the marketplace,” stated Kean.

“With multiple new deals and arrangements for transporting responsibly-sourced or certified natural gas, we are leveraging our status as a low-methane emissions intensity leader within our sector,” said the CEO.

Domestic and LNG

“Our assets remain well positioned to serve growing domestic markets and export locations for LNG and Mexico. Over the next 25 years we plan to build on continued strong performance in our base businesses while exploring exciting new opportunities,” Kean concluded.

KMI President Kim Dang acknowledged that transported volumes were down 3 percent, or about 1.1 million dekatherms per day ,versus the fourth quarter 2020, primarily driven by a continued decline in Rockies production and pipeline outages.

“Physical deliveries to LNG facilities off of our pipeline averaged about 5 million dekatherms per day that's a 33 percent increase versus the fourth quarter of 2020,” stated Deng.

“Our market share of LNG deliveries remains around 50 percent. Exports to Mexico were down in the quarter when compared to the fourth quarter of 2020 as a result of third-party pipeline capacity recently added to the market,” she stated.

“Overall deliveries to power plants were up slightly, at least in part, partially driven by coal supply issues, while LDC deliveries were down as a result of lower heating degree days,” explained Deng

“Our natural gas gathering volumes were up 6 percent in the quarter. For gathering volumes, though, I think the more informative comparison is the sequential quarter,” she added.

“So compared with the third quarter of this year, volumes were up 7 percent, with a big increase in Haynesville volumes, which were up 19 percent and Bakken volumes, which were up 9 percent,” analysts were told.

The US expects that the consumption of domestic natural gas will average 82.9 billion cubic feet per day in 2021, lower than in the previous year as prices rise, while US monthly LNG exports are reaching levels to be just short of shipment totals from the largest global suppliers Australia and Qatar.

US production of natural gas dropped in February while LNG exports also plunged 23 percent because of the bad weather and navigational restrictions on the Gulf Coast during the month.

The US Government expects LNG exports will average 8.5 billion cubic feet per day for all of 2021compared with 9.8 Bcf per day during January when around 18 to 22 cargoes were lifted each week from the six plants in operation amid high spot prices in North Asia.

The American Gas Association has welcomed the balanced perspective taken in the draft guidance released by the White House Council on Environmental Quality in relation to the greenhouse-gas emissions of major energy, pipeline and liquefied natural gas projects.

The new draft guidance is aimed at helping to clarify how federal agencies should consider the greenhouse-gas impacts of major project permitting decisions when conducting environmental reviews under the US National Environmental Policy Act.

“The draft guidance from the White House Council on Environmental Quality will help facilitate the environmentally-responsible construction of natural gas pipelines and other infrastructure that our customers want and need,” said AGA President and Chief executive Karen Harbert.

“Streamlining and clarifying the permitting process helps the natural gas industry provide timely, safe, reliable and affordable service to the 178 million Americans who enjoy the benefits of natural gas and the millions more that want it, but do not yet have access,” added Harbert.

In particular, the draft guidance would help focus agency resources on evaluating the reasonably foreseeable greenhouse-gas impacts of agency permitting decisions, rather than “expending resources on evaluating remote or speculative matters” that do not have a sufficiently close causal relationship with an agency’s permitting decision.

The guidance directs agencies to consider greenhouse-gas emissions when “substantial enough to warrant quantification.”

Agencies do not have to consider how a project might impact greenhouse emissions if doing so would be “overly speculative.”

It reverses a 2016 rule from the same Council under the previous presidency that directed agencies to analyze how the projects they approve will contribute to climate change.

President Donald Trump withdrew the previous guidance in April 2017.

Environmental groups have said the proposal would reduce environmental protection.

The US Congress has been divided along party lines on the proposal, with Republicans praising the Trump Administration for removing hurdles for energy development as the nation embarks on boosting domestic natural gas use in power generation and LNG exports.

“This proposed guidance will help ensure that major energy projects in Wyoming and across the country can move forward without needless delays and litigation,” said John Barrasso, Republican Senator for Wyoming and head of the Environment and Public Works Committee.

The American Petroleum Institute also approved, saying it would “streamline” the National Environmental Policy Act (NEPA).

“NEPA, which is a procedural statute only, increasingly has been misused to delay and prevent development, which negatively affects jobs, tax revenue and investment in communities across the country,” said Howard Feldman, senior director of regulatory and scientific affairs for the American Petroleum Institute.

The US is in the midst of an LNG export build-out focused mostly on the Gulf Coast to earn billions of dollars for the American economy from the shale-gas glut by providing foreign countries with cleaner natural gas to replace coal.

At present four LNG export plants are on stream, Sabine Pass and Cameron LNG in Louisiana, Corpus Christi in Texas and Cove Point in Maryland.

The Elba Island LNG plant in Georgia and the Freeport facility in Texas are also scheduled for start-up to give the US six exporting plants. 

At least a dozen more liquefaction and export plants and feed-gas pipelines are making progress along the regulatory route.