Kinder Morgan (KMI) Q2 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Kinder Morgan (KMI) CEO Steve Kean said their energy customers aren’t defaulting on their payments to the company even though the pricing environment remains challenging

“On customer credit, we continue our extreme focus throughout our commercial and corporate organizations. In the past quarter, credit defaults amounted to about 0.3% of budgeted revenue annualized, and most of that is associated with the Peabody bankruptcy that took place in the first two weeks of the quarter. Without that we would be well under 0.1%. And again, putting our situation in perspective, we’re a broadly diversified mid-stream company. We’ve got a strong and diversified customer base, which includes integrated energy majors, utilities and end-users. So the credit picture is stabilizing.”

Natural gas continues to gain market share versus coal

“We continue to see strong demand for natural gas across our network. Transport volumes are up 5% year-over-year, we’re getting good terms on storage, transportation and sales renewals in our business. Power burn on our pipes is up 8% year-over-year and recall the power burn was up 16% from Q2 of ’14 to ’15, so there is strong compounding work coming from the power sector. For the first time ever gas is making up a larger share of the fuel for power generation and coal, that’s been true year-to-date for 2016, and if I close in 2015 in the last — most recent quarter is through ’16, 35% of generation came from gas, versus 27% from coal.”

Kinder Morgan (KMI) Chairman Richard Kinder’s view on declining oil shipping volumes

“Yes not necessarily expecting an ongoing decline rate, what we do in this business is we’re looking at deploying capital that gives us an attractive return on the incremental barrels that we are producing that is associated with that capital spend and so that’s kind of how we look at each of our investments here. We don’t aim to necessarily look for higher returns, keep production flat or grow it slightly we really make those decisions on each individual capital and investment in the development programs that we spend money on a CO2.”