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Kinder Morgan (KMI) to Proceed With PHP Expansion Project

·4-min read

Kinder Morgan Inc. KMI, through its subsidiary, reached a final investment decision on its proposed natural gas pipeline expansion project.

The final investment decision was taken after Permian Highway Pipeline (“PHP”) secured binding firm transportation agreements for all available capacities. PHP is owned by subsidiaries of Kinder Morgan, with a 26.7% ownership interest.

The decision came as multiple liquefied natural gas processing facilities have been proposed along the Texas Gulf Coast to meet Europe’s rising demand for gas. The facilities would require 3.1 billion cubic feet per day of natural gas supply.

Permian Highway transports natural gas from the Waha hub on the Texas side of the Permian Basin to Katy, TX, near Houston. The pipeline currently carries 1.2 billion cubic feet per day from the Permian Basin of West Texas and New Mexico.

The expansion would increase the pipeline’s total capacity by up to 550 million cubic feet per day. The project will increase natural gas supplies from the Waha area to various mainline connections, which involve Katy, TX, and other U.S. Gulf Coast markets.

Kinder Morgan plans to bring the enhanced natural gas pipeline into service in November 2023, subject to necessary approvals. The project will reduce transportation constraints from the Permian Basin, and help reach the company’s domestic and global energy requirements.

The project is expected to support natural gas production growth in West Texas. It will provide several liquefaction facilities with a more affordable and reliable supply. Beside this, the project will grant access to high-priced markets and transportation flow assurance, which is crucial to reducing flared volumes.

Company Profile & Price Performance

Headquartered in Houston, TX, Kinder Morgan is a leading midstream energy infrastructure provider.

Shares of the company have underperformed the industry in the past six months. The KMI stock has gained 5.7% compared with the industry’s 8.7% growth.

 

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Zacks Rank & Stocks to Consider

Kinder Morgan currently has a Zack Rank #3 (Hold).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Phillips 66 PSX is the leading player in each of its operations like refining, chemicals and midstream in terms of size, efficiency and strengths. It has an oil and gas pipeline network of 22,000 miles, which is expected to increase in the coming days.

Phillips 66 has hiked its quarterly dividend to 97 cents per share, representing an increase of 5% from the prior quarterly dividend. With the recent resumption of the stock repurchase program, the increment in the quarterly dividend represents Phillips 66’s strong focus on returning capital to stockholders. Since the company’s inception in 2012, this has resulted in its 11th annual dividend hike.

Range Resources Corporation RRC is among the top 10 natural gas producers in the United States. The upstream energy firm expects the free cash flow to exceed $1.4 billion this year, which could be the highest among Appalachian players.

Range Resources has reinstated its regular quarterly cash dividend, expected to start in the second half of this year. The company anticipated its annual dividend rate to be 32 cents per share. RRC’s board of directors approved the authorization of a $500-million share repurchase program, which is likely to be funded with the company’s free cash flow generation.

Antero Resources AR is among the fast-growing natural gas producers in the United States. The leading natural gas producer is expecting a free cash flow yield of 25% for 2022, which could be the highest among Appalachian players.

Antero Resources is targeting a capital return program of 25-50% of free cash flow annually, beginning with the implementation of the share repurchase program. The company’s board authorized a share repurchase program of up to $1 billion of outstanding common stock.


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