Executive Summary / Key Takeaways

• Kinder Morgan, Inc. (KMI) is strategically positioned to capitalize on North America's surging natural gas demand, primarily driven by robust LNG exports and the escalating energy needs of AI data centers.
• The company's extensive, integrated natural gas pipeline network, spanning 79,000 miles, serves as a critical competitive advantage, enabling efficient expansion and connectivity to major demand centers.
• KMI reported strong Q3 2025 results, with EBITDA up 6% and adjusted EPS growing 16% year-on-year, and anticipates exceeding its full-year 2025 budget, underpinned by solid operational performance and recent acquisitions.
• A substantial $9.3 billion project backlog, largely supported by long-term, take-or-pay contracts, and an additional $10 billion in potential natural gas-focused opportunities, signal significant future growth in EBITDA and EPS.
• KMI maintains a strong financial profile with a net debt to adjusted EBITDA ratio of 3.9x, ample liquidity, and expected substantial cash tax benefits from tax reform in 2026 and 2027, providing robust capacity for continued investment and shareholder returns.

The Unfolding Natural Gas Narrative: KMI's Strategic Foundation

Kinder Morgan, Inc. stands as a cornerstone of North American energy infrastructure, operating a vast network of pipelines and terminals crucial to the continent's energy supply. Founded in 1997, the company's history includes a pivotal shift in 2014 from a Master Limited Partnership (MLP) to a corporate structure, simplifying its tax profile and broadening its investor appeal. This foundational journey has culminated in KMI's current strategic focus: leveraging its unparalleled infrastructure, particularly in natural gas, to meet the rapidly expanding energy demands of the 21st century.

The central investment thesis for KMI revolves around the compelling "natural gas story" in North America. Global gas demand is projected to increase by 25% over the next 25 years, with U.S. natural gas demand alone expected to grow by 20% by 2030, according to Wood Mackenzie. KMI's internal projections are even more bullish, anticipating a 28 Bcf/day increase in natural gas demand by 2030. This growth is overwhelmingly driven by two powerful forces: the exponential rise in Liquefied Natural Gas (LNG) exports and the escalating electricity requirements of Artificial Intelligence (AI) data centers.

KMI's core technological differentiation lies not in a single product, but in its sophisticated, integrated pipeline and storage network, coupled with advanced operational efficiency and data-driven optimization. The company owns or operates approximately 79,000 miles of pipelines, 139 terminals, and over 700 Bcf of working natural gas storage capacity. This extensive network allows KMI to transport over 40% of the natural gas in the United States, including more than 40% of the volume destined for LNG export facilities, 25% of the gas fueling U.S. natural gas power plants, and 50% of the gas exported to Mexico. The tangible benefits of this "technology" are clear: unparalleled reliability in gas delivery, cost-effectiveness through optimized routes, and the inherent flexibility to expand and connect new demand centers. For instance, the ability to efficiently integrate new processing facilities, like the Outrigger Energy system, or to expand existing pipelines with additional compression, demonstrates the adaptability and scalability of KMI's infrastructure. The company's RNG generation capacity, currently at approximately 6.90 Bcf per year, further highlights its embrace of evolving energy technologies within its core infrastructure model. This robust, interconnected system forms a significant competitive moat, enabling KMI to offer comprehensive, reliable, and scalable solutions that many competitors cannot match.

Competitive Landscape and Strategic Positioning

Kinder Morgan operates in a highly competitive energy infrastructure sector, vying with major players such as Enbridge Inc. , Williams Companies, Inc. , Enterprise Products Partners L.P. , and ONEOK, Inc. . KMI's competitive standing is primarily defined by its sheer scale and integrated approach, particularly within the U.S. natural gas market.

Compared to Enbridge (ENB), which has diversified significantly into renewables, KMI maintains a more focused U.S. presence in traditional energy infrastructure, albeit with growing interests in low-carbon opportunities like CO2 transport and RNG. KMI's extensive pipeline network provides superior geographic reach in key U.S. regions, offering cost-effective transportation. While ENB's broader portfolio might offer greater adaptability to shifting energy demands, KMI's focused scale in natural gas gives it a distinct advantage in operational reliability and customer service for its core offerings.

Against Williams Companies (WMB), a strong natural gas infrastructure provider, KMI's broader portfolio, encompassing terminals and CO2 operations, offers a more diversified revenue base. KMI's strategic emphasis on reliability through its vast network contrasts with WMB's focus on rapid project development. KMI's integrated terminal operations are a key differentiator, allowing it to handle a wider array of commodities, while WMB excels in gas-specific efficiency.

When compared to Enterprise Products Partners (EPD), a leader in natural gas liquids and crude oil pipelines, KMI's products pipelines and terminals segments are in direct competition. KMI's wider service offerings, including CO2, provide a broader value proposition. EPD often demonstrates superior cost efficiency in its specialized liquids transport, potentially offering a pricing advantage in certain segments. However, KMI's multi-segment approach, while potentially diluting some efficiency, offers a more comprehensive solution to customers.

ONEOK (OKE), primarily focused on natural gas gathering, processing, and storage, directly overlaps with KMI's natural gas pipeline operations. KMI's national footprint contrasts with OKE's regional efficiency, suggesting OKE might be more agile in responding to localized demands. KMI's asset scale provides an edge in comprehensive services, while OKE's focused execution can lead to higher efficiency in specific gas markets.

Overall, KMI's competitive advantages stem from its extensive, interconnected pipeline network, which facilitates reliable and cost-effective transportation, and its established regulatory licenses that provide access to critical routes. These factors create significant barriers to entry for new players, bolstering KMI's market share against competitors. KMI's strategy of building off its existing footprint and its proven track record of delivering projects on time and on budget are critical in winning new business, particularly for time-sensitive projects like those serving AI data centers.

Financial Performance and Operational Strength

Kinder Morgan delivered a strong financial performance in the third quarter of 2025, reflecting the effectiveness of its strategic initiatives and operational execution. For the three months ended September 30, 2025, total revenues reached $4.146 billion, an increase from $3.699 billion in the prior-year period. Net income attributable to Kinder Morgan, Inc. stood at $628 million, consistent with $625 million in Q3 2024, while basic and diluted earnings per share remained at $0.28. On an adjusted basis, excluding certain items, adjusted net income and adjusted EPS grew 16% year-over-year, demonstrating robust underlying business growth.

The Natural Gas Pipelines segment was a primary driver of this performance, with revenues increasing to $2.676 billion in Q3 2025 from $2.176 billion in Q3 2024, and Segment EBDA growing 8.25% to $1.391 billion. This growth was fueled by a 6% increase in transport volumes, driven by LNG deliveries on the Tennessee Gas Pipeline, new contracts from Texas Intrastate system expansion projects, and increased Permian deliveries. Natural gas gathering volumes also surged by 9%, largely due to increased producer activity to meet growing LNG demand.

The Products Pipelines segment saw a slight revenue decline to $677 million in Q3 2025 from $711 million in Q3 2024, primarily due to lower product sales prices. However, Segment EBDA increased 3.97% to $288 million. Refined product volumes were down 1% in the quarter, but full-year 2025 volumes are projected to be up 1% and in line with budget. The Terminals segment continued its steady performance, with revenues rising to $518 million in Q3 2025 from $498 million in Q3 2024, and Segment EBDA growing 2.24% to $274 million. Liquids lease capacity remained high at 95%, supported by strong rates and utilization at key hubs. The Jones Act tanker fleet is fully leased through 2026, with 97% leased through 2027, reflecting favorable market conditions and extended contract commitments.

Conversely, the CO2 segment experienced a decline, with revenues falling to $282 million in Q3 2025 from $319 million in Q3 2024, and Segment EBDA decreasing 19.64% to $135 million. This was mainly attributed to lower CO2 volumes and sales prices, as well as non-cash mark-to-market derivative impacts. Full-year 2025 oil volumes are forecasted to be 4% below 2024.

From a liquidity perspective, KMI's financial health is robust. Net cash provided by operating activities for the nine months ended September 30, 2025, was $4.225 billion, an increase from $4.125 billion in the prior year, driven by the strong performance of the Natural Gas Pipelines segment. The company's net debt to adjusted EBITDA ratio improved to 3.9x at the end of Q3 2025, down from 4.1x after the Outrigger acquisition. KMI has substantial borrowing capacity, with approximately $2.90 billion available under its $3.50 billion credit facility as of September 30, 2025. This strong cash flow generation and healthy balance sheet provide ample capacity to fund its ambitious growth projects and maintain its dividend.

Strategic Initiatives and Growth Outlook

Kinder Morgan's strategic initiatives are firmly aligned with the burgeoning demand for natural gas. The company's project backlog expanded to $9.3 billion by Q3 2025, a significant increase from $3 billion at the end of 2023. This backlog is a testament to KMI's ability to secure long-term, take-or-pay contracts with creditworthy customers, providing stability and visibility into future cash flows. The backlog multiple remains disciplined, staying below 6x.

Recent additions to the backlog and strategic investments underscore this growth trajectory. In February 2025, KMI completed the $648 million acquisition of a natural gas gathering and processing system from Outrigger Energy II LLC in North Dakota, which includes a 0.27 Bcfd processing facility and a 104-mile rich gas gathering pipeline. This acquisition strategically complements KMI's existing Bakken assets and is expected to be immediately accretive. Other key projects include the $1.7 billion Trident project and the upsized Mississippi Crossing (MSX) project (1.8 Bcf/day), both serving growing demand in the Southeast. The $430 million Bridge project, an extension of the Elba Express pipeline, will deliver 325 MMcf/day into South Carolina, primarily for power demand, and is easily expandable to over 1 Bcf/day. KMI is also advancing its Hiland Express NGL conversion project, on track for Q1 2026.

The company is actively pursuing an additional "over $10 billion in potential projects," primarily in natural gas, with a significant portion targeting power generation and LNG exports. This includes exploring over 10 Bcf/day of natural gas opportunities for the power sector. A notable initiative is the recently launched binding open season with Phillips 66 (PSX) for the Western Gateway Pipeline, a proposed refined products system from Texas to Arizona and California, targeting a 2029 in-service date. This project aims to provide an attractive alternative for markets facing declining refining capacity in California.

KMI's outlook for 2025 remains positive. The company expects to exceed its original budget, which projected a 4% growth in Adjusted EBITDA and a 10% growth in Adjusted EPS from 2024. This outperformance is largely attributed to the Outrigger acquisition, although it is somewhat tempered by lower-than-budgeted D3 RIN prices and RNG volumes. KMI expects to declare dividends of $1.17 per share for 2025, a 2% increase from 2024. Management anticipates investing $3 billion in expansion projects, acquisitions, and joint ventures during 2025, with an average of approximately $2.5 billion per year in expansion capital expenditures for the next several years.

A significant tailwind for KMI's future growth and financial flexibility is the "One Big Beautiful Bill Act" (OBBBA), signed in July 2025. This legislation permanently reinstates bonus depreciation and modifies business interest expense limitations, leading to expected substantial cash tax benefits in 2026 and 2027. KMI does not anticipate being a material cash taxpayer until 2028, freeing up significant capital for further investment.

Risks and Challenges

While KMI's outlook is compelling, investors must consider several pertinent risks. The company is exposed to commodity price fluctuations for natural gas, NGLs, and crude oil, with approximately 5% of its EBITDA directly exposed. Although two-thirds of its EBITDA is generated from take-or-pay contracts and 30% is fee-based or hedged, sustained low commodity prices could still impact certain segments, particularly CO2 and gathering volumes.

Regulatory and environmental risks remain a constant. KMI is involved in various legal proceedings, including a class action lawsuit related to pension plan changes, where plaintiffs seek over $100 million. Environmental cleanup and enforcement actions, such as Superfund site liabilities, also pose potential costs. While KMI vigorously defends these matters and accrues for probable losses, there is no assurance that significant liabilities will not arise from increasingly stringent regulations or claims. Management, however, is optimistic about an improved federal permitting environment, which could expedite project timelines.

Tariffs present another challenge, though KMI has actively worked to mitigate their impact. For its major projects, tariffs are estimated to be roughly 1% of project costs, with mitigation strategies including preordering equipment, negotiating caps, and securing domestic steel. The competitive nature of the industry means KMI must continuously secure new contracts and manage recontracting risk. For instance, the 10-year contracts for the GCX and PHP pipelines expire in 2029 and 2030, respectively. However, management views this recontracting risk as low, given the pipelines' integration into KMI's broader network and the ability to extract better value.

Conclusion

Kinder Morgan, Inc. is at the forefront of a transformative period in North American energy, strategically positioned to capitalize on the robust and growing demand for natural gas. The company's extensive, integrated infrastructure, particularly its natural gas pipeline network, is not merely a collection of assets but a sophisticated operational technology that provides a durable competitive advantage. This technological moat, characterized by reliability, scalability, and efficiency, enables KMI to connect vital supply basins to burgeoning demand centers driven by LNG exports and the insatiable energy appetite of AI data centers.

KMI's strong financial performance in Q3 2025, coupled with a substantial and growing project backlog, underscores its ability to translate strategic vision into tangible results. The company's disciplined capital allocation, healthy balance sheet, and anticipated tax benefits provide a solid foundation for funding its ambitious expansion plans. While challenges such as commodity price volatility, regulatory hurdles, and competitive pressures persist, KMI's proven track record, strategic positioning, and commitment to expanding its core natural gas business, supported by its operational technology, position it for sustained growth in EBITDA and EPS for years to come. For discerning investors, Kinder Morgan represents a compelling opportunity to participate in the long-term growth of America's energy future.