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.
Recommended Reading
Woodside Expected to Close $900MM Tellurian Acquisition in December
2024-08-27 - Tellurian, which is developing the 27.6 mtpa Driftwood LNG project in Louisiana, expects its recent sale to Woodside Energy to close in December.
Woodside Energy to Buy LNG Developer Tellurian for $900 Million
2024-07-21 - Australia's Woodside Energy will pay $1 per share for Tellurian, which earlier this year sold its upstream Haynesville Shale assets to convert into a pure play LNG company, in a deal with an estimated enterprise value of $1.2 billion, including debt.
Woodside to Emerge as Global LNG Powerhouse After Tellurian Deal
2024-07-24 - Woodside Energy's acquisition of Tellurian Inc., which struggled to push forward Driftwood LNG, could propel the company into a global liquefaction powerhouse and the sixth biggest public player in the world.
Woodside to Maintain at Least 50% Interest in Driftwood LNG
2024-09-18 - Australia’s Woodside Energy plans to maintain at least a 50% interest in the 27.6 mtpa Driftwood LNG project that it's buying from Tellurian, CEO Meg O’Neill said during a media briefing at Gastech in Houston.
Woodside on the Prowl for Driftwood Partners, Gas Suppliers
2024-09-26 - Australian natural gas and LNG exporter Woodside Energy, which recently agreed to acquire Tellurian in a deal valued at $1.2 billion, isn’t yet looking to develop an upstream U.S. onshore position to secure gas for Driftwood LNG.