Kinder Morgan reports Q2 miss, remains optimistic on natgas demand

By Vallari Srivastava

(Reuters) -U.S. pipeline and terminal operator Kinder Morgan said on Wednesday it expects data center driven electricity need to be a significant driver of natural gas demand, after missing Wall Street estimates for second-quarter profit and revenue.

The company, in its post-earnings call, reiterated that AI operations and data centers will boost demand for natural gas, adding that reliability of the fuel will help in increased reliance over other renewable sources.

"We're having commercial discussions on over 5 billion cubic feet per day (bcf/d) of opportunities related to power demand, and that includes the 1.6 of data center demand," a company executive said in the call.

The company's bullish outlook comes at a time when natural gas prices have declined nearly 17.5% since the start of the year.

Adjusted core profit from the company's natgas pipeline segment rose nearly 2.5% to $1.23 billion, as higher transport and gathering volumes helped offset the impact of asset divestitures and lower commodity prices.

Adjusted core profit from the transportation of CO2, however, fell about 6.3% to $164 million in the quarter, hurt by lower crude and natural gas liquids volumes and CO2 sales.

The company launched a binding open season on its proposed South System Expansion 4 project, designed to increase Southern Natural Gas (SNG) Pipeline's South Line capacity by 1.2 bcf/d.

"This expansion (SNG South Line) is a $3 billion effort, designed to meet AI and data center demand, and also very capital efficient... it is likely to generate very attractive returns for investors," said Morningstar analyst Stephen Ellis.

The terminal operator posted an adjusted profit of 25 cents per share in the reported quarter, falling short of analysts' estimates of 26 cents per share, according to LSEG data.

Kinder's quarterly net revenue came in at $3.57 billion, also below estimates of $4.13 billion.

Shares of the company were down 2.9% in extended trade.

(Reporting by Vallari Srivastava in Bengaluru; Editing by Shailesh Kuber)

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