Kinder Morgan Upbeat Despite Low Natural Gas Prices

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Natural gas prices have been suppressed for much of the year, led by bearish economic conditions. Volatility is high as well, given inclement weather and other disruptions. But Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas) says the market for natural gas looks promising, supported in part by U.S. exports.

On Thursday, Henry Hub, the U.S. benchmark for the price of natural gas, was trading at about $2 per million British thermal units (MMBtu). The price has been down about 20% since July 4.

"Notwithstanding the current low-price environment for natural gas, the future looks very bright for our natural gas pipelines business segment," said Kim Dang, the chief executive officer of Kinder Morgan.

Among its milestones so far this year, the company noted that construction began on an expansion to the Kinder Morgan Texas Pipeline (KMTP) system that would deliver gas from the Eagle Ford basin into a broader intrastate network.

The company started construction in January on the $250 million Tejas Eagle Ford Expansion Project, which runs 67 miles from a compressor station in Freer, Texas, to the existing Tejas pipeline system. The new line is expected to transport up to 2 billion cubic feet per day (Bcf/d) of natural gas, and it is on pace for completion in November.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Pipeline Project Database can learn more from a detailed project report.

Dang said she's expecting natural gas demand to grow "substantially" to 2030, supported by a surge in exports of piped gas to Mexico and exports of super-cooled liquefied natural gas (LNG).

Over the seven-day period ending July 10, federal data show exports to Mexico averaged 6.8 Bcf/d. Meanwhile, there were 23 vessels laden with LNG that left U.S. export terminals that week, including one from Kinder Morgan's facility at Elba Island, carrying a combined 85 billion cubic feet (Bcf) of gas in the liquid form.

Hurricane Beryl, which made landfall on July 8, knocked the Freeport LNG facility offline, reducing feed gas by about 2 Bcf/d, however.

Elsewhere, Kinder Morgan said it budgeted $2.7 billion for the year, up 15% from 2023 levels. The company pegged its budgetary expectations on West Texas Intermediate crude oil prices at $82 per barrel and Henry Hub at $3.50 per MMBtu.

Respondents to a recent energy survey from the Federal Reserve Bank of Kansas City said they expect Henry Hub to average $3 per MMBtu over the next six months. Oil prices are expected to hover near $80 per barrel.

On upstream activity, respondents said they needed oil priced at $64 per barrel to make a profit, while the natural gas price needed was closer to $3.47 per MMBtu. To increase upstream activity, respondents needed $91 per barrel oil and $4.68 for natural gas.

Kinder Morgan on Thursday raised its dividend payout by 2% relative to second quarter 2023 levels.

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