Kinder Morgan Inc. (KMI) — a best-in-class midstream operator and a holding in our model portfolio — has released its Q4 number and updated guidance for 2021, notes Elliott Gue, editor of Energy and Income Advisor.

As was the case with its Q3 results, Kinder Morgan’s Q4 took hits from both shale drilling cutbacks and sharply reduced demand for refined products. The company also absorbed $1.95 billion in non-cash asset impairments for the full year.

Shortfalls were felt organization-wide including at natural gas transportation, Kinder’s largest division at 63.5 percent of Q4 EBDA. Natural gas gathering volumes fell by -20 percent, reflecting especially weak activity in the Eagle Ford and Kinderhawk systems. That offset the positive impact of increased volumes on the company’s Texas Intrastate pipeline systems and the opening of the Elba Island LNG export facility.

Crude and condensate volumes dropped by -26 percent from year ago levels, though the earnings impact was muted by capacity contracts.

As for refined products, gasoline throughput was down -10 percent from a year ago, while jet fuel volumes plunged -47 percent. And higher realized prices at the CO2 division were more than offset by the negative impact of -16 percent lower production at owned wells.

Nonetheless, Kinder’s overall distributable cash flow per share for Q4 was just -6.8 percent less than a year ago. And the company also generated enough cash flow in 2020 to fully fund its $1.65 billion in growth capital expenditures, $50 million in share buybacks, $989 million in debt reduction and $2.37 billion in dividends, including a 5 percent payout boost.

The bottom line: Kinder’s superior size and diversification, focus on well-placed assets and creditworthy customers, strong balance sheet, access to low cost capital and cost discipline resulted in another solid year.

That was despite pandemic and energy price-related pressures on nearly every aspect of its business. Kinder’s showing portends another solid year for this best in class midstream.

One spur to earnings will be the now fully operating Permian Highway Pipeline, bringing previously flared gas from west Texas to the Gulf Coast. Management brought the 430-mile system on stream January 1, despite what had been vociferous local opposition.

That too is a great sign this company will be able to navigate a likely tougher regulatory environment the next several years to benefit from what’s shaping up as a growing scarcity of transportation capacity in North America. Kinder remains a buy up to $22 for those without a full position.

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