US-based pipeline operator Kinder Morgan has reported a smaller-than-expected quarterly profit and has cut its adjusted core earnings forecast this year following a decline in fuel demand sparked by coronavirus and a collapse in oil prices.
The company cut its 2020 planned growth spending by about $700m, or nearly 30% from its previous estimate. It has also cut expenses and sustaining capex by more than $100m from its planned budget.
The pipeline operator said it won’t pursue some expansion plans as it intends to preserve cash to weather the downturn. It is reducing its $2.4bn budget for expansion projects.
According to Reuters, Kinder Morgan also took a non-cash impairment charge of $950m in Q1, related to certain oil and gas producing assets in its CO2 unit.
KMI executive chairman Richard D Kinder said: “While we have the financial wherewithal to pay our previously planned dividend increase, with significant coverage, in unprecedented times such as these, the wise choice is to preserve flexibility and balance sheet capacity.
“Assuming a return to normal economic activity, we would expect to make that determination when the board meets in January 2021 to determine the dividend for the fourth quarter of 2020.”
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By GlobalDataKinder Morgan operates the Gulf Coast Express gas pipeline in the Permian and will continue to move forward with construction activities of its Permian Highway Pipeline project, which would be operational early next year.
Kinder Morgan President Kim Dang said: “Sharp declines in both commodity prices and refined product demand in the wake of the Covid-19 pandemic clearly affected our business and will continue to do so in the near term.”
This January, Kinder Morgan (KMI) announced the sale of its 25 million shares in Canada’s Pembina Pipeline, which it received as part of the latter’s acquisition of the outstanding common equity of Kinder Morgan Canada for $764m.
In August last year, Pembina Pipeline initially signed agreements to buy Kinder Morgan Canada and the US portion of the Cochin pipeline for C$4.35bn ($3.28bn).
In September 2018, Kinder Morgan intended to divest the Canadian section of the Cochin pipeline, which transports light hydrocarbon liquids between the US and Canada.
