Kinder Morgan and massive industrial park owner team up for project near Houston Ship Channel

Published On: April 17, 2024

Kinder Morgan Inc. (NYSE: KMI) is working with the owner of a massive industrial park in the Houston area on a carbon storage project.

During its first-quarter 2024 earnings call April 17, the Houston-based midstream giant announced it had executed a pore space lease agreement with TGS Cedar Port Partners LP, which owns TGS Cedar Port Industrial Park, the largest master-planned, rail and barge-served industrial park in the U.S.

The pore space spans 10,800 acres near the Houston Ship Channel and can store more than 300 million tonnes of carbon dioxide. Kinder Morgan said this will give the company a geographically and geologically advantaged platform to develop carbon sequestration solutions for nearby emissions.

Permit applications for carbon dioxide sequestration in the U.S. have increased by 500% since 2021, and some big names in oil and gas are part of that growth, the Houston Business Journal previously reported. However, commercial and regulatory structures are still coming together to make projects work for both customers and suppliers of carbon capture and sequestration, Chevron Corp. (NYSE: CVX) CEO Mike Wirth said at CERA Week by S&P Global in Houston on March 19.

Kinder Morgan considers carbon dioxide one of its primary commodities, though earnings for its CO2 segment were down this quarter.

“CO2 business segment earnings were down compared to the first quarter of 2023, primarily due to lower CO2 sales volumes, which were down 7% on a net-to-KMI basis compared to the first quarter of 2023,” Kinder Morgan President Tom Martin said in the April 17 earnings release.

However, Martin said in the release that the prices of the other commodities – natural gas liquids and petroleum products – offset the CO2 prices.

CEO Kim Dang added during the earnings call that these commodities work well together in the business, but the company is open to selling any assets for the right price.

“The businesses we own and operate we think are similar, and they are stable, fee-based assets that are core to the energy infrastructure. And we will continue to operate them, absent somebody coming in and offering to buy them at a great price, in which case we are highly economic and we would entertain that,” Dang said during the call.

Kinder Morgan’s first-quarter 2024 results

For Q1 2024, Kinder Morgan earned $3.84 billion in revenue, slightly down from $3.89 billion a year earlier. The company missed analyst expectations for revenue by 11.8%, according to Yahoo Finance, which listed expectations for revenue at $4.35 billion.

Kinder Morgan’s net income for the quarter was $746 million, up from $679 million in Q1 2023. That resulted in earnings per share of33 cents, up 10% from a year earlier, and adjusted EPS of34 cents, up 13%. Analysts expected earnings of34 cents per share, per Yahoo Finance, while the Zacks Consensus Estimate was 33 cents per share.

The company said that the results were strong, even though natural gas prices were low.

“Although natural gas prices are expected to be significantly below budget for the full year, given that we have modest direct commodity price exposure and have seen strong execution across our businesses, there’s no change to our full-year budget guidance,” Dang said in the release.

Natural gas prices out of the Waha Hub in West Texas dropped to negative numbers this month as companies work to increase egress routes out of the backlogged Permian Basin. CFO David Michels said during the company’s earnings call that Kinder Morgan was advantaged because of its ample storage space, but the company is considering adding more pipelines out of the region.

“We see a need for another pipe; Michels said. “We don’t have anything to announce today, but we continue to try and work on commercializing another pipe, and we’re still having discussions with customers on this front.”

Earlier this year, Kinder Morgan said in its fourth quarter 2023 earnings results that it was looking to expand its downstream operations as well to account for more egress needed out of the Permian Basin.