U.S. pipeline operator Kinder Morgan Inc. on April 22 reported a smaller-than-expected quarterly profit and cut its adjusted core earnings forecast for the year, following a coronavirus-induced decline in fuel demand and a crash in crude prices.
The company now expects an 8% fall in annual adjusted EBITDA from previous estimates of about $7.6 billion.
Kinder Morgan also took a non-cash impairment charge of $950 million in the first quarter related to certain oil and gas producing assets in its CO₂ unit.
The company cut its 2020 capex by about $700 million, or nearly 30% from its previous estimate.
Oil and gas pipeline and storage companies in the United States and Canada have slashed their budgets for the year as their customers wind down drilling activity in the face of dwindling demand and a price war between Saudi Arabia and Russia that has sent crude to its lowest in decades.
"Sharp declines in both commodity prices and refined product demand in the wake of the COVID-19 pandemic clearly affected our business and will continue to do so in the near term," Kinder Morgan President Kim Dang said.
The company said it expects crude oil pricing for the rest of the year to average around $30/bbl, down from its first-quarter realized price of $54.61/bbl.
"KMI threaded the needle well, in my opinion," said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh, referring to the company's decision to lower the quantum of its dividend increase to save cash.
"That said, my concerns for the future are twofold. First, their material cuts to growth capex may impair DCF (distributable cash flow) in future years. Second, if WTI prices don't recover to north of $40 by later in 2020, their CO₂ business may be subject to material further impairment," he added.
The Houston-based company, which has pipelines as well as storage terminals, reported a net loss attributable of $306 million, or 14 cents per share, in the first quarter ended March 31, compared with a profit of $556 million, or 24 cents per share, a year earlier.
On an adjusted basis, the company reported a profit of 24 cents per share, missing average analysts' estimates of 27 cents per share, according to IBES data from Refinitiv.
The company's shares were down 1.8% at $14.40 in extended trading.
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