Kinder Morgan Q3 2026 Earnings: Record $764M Profit as the $14.4B Backlog Becomes the Story

On October 21, 2026, Kinder Morgan reported all-time record third-quarter results: net income of $764 million, up 22% from a year earlier, with EPS and Adjusted EPS both up 21% to $0.34 and $0.35, and Adjusted EBITDA of $2.18 billion (+9%). But the number that matters most is not on the income statement — it is the $14.4 billion expansion project backlog, up $4.7 billion in a single quarter and the largest in company history, with $13.2 billion of it in natural gas. More than 75% of that backlog serves power generation and utility demand: this is the AI electricity trade, expressed as pipeline steel. Our new Kinder Morgan ledger models two annuals plus this quarter in plain-text double entry.

The Headline Numbers​

Every figure below comes from the Form 8-K and the Q3 2026 earnings release (Exhibit 99.1, Tables 1–6):

Three things stand out. First, the bottom line outran the top line by thirteen points (net income +22% on revenue +9%), and the release tells you exactly where the leverage came from: below the operating line, where interest expense fell $26 million, other income swung $82 million (including a $71 million Terminals divestiture gain), and the effective tax rate dropped from 22.0% to 19.4%. Second, the quarter is noisy in offsetting directions — a $138 million legal and environmental accrual in Products Pipelines against the $71 million Terminals gain — which nets to just $28 million of Certain Items, so GAAP and adjusted growth round to the same 21–22%. Third, the share count is essentially frozen at 2.23 billion, so unlike a buyback story, every point of EPS growth here is operating performance, not financial engineering.

Revenue Deep Dive​

Kinder Morgan reports four segments, and the release scores each on EBDA (earnings before DD&A) rather than revenue — the right lens for a fee-based pipeline company, where the question is contracted cash flow, not sales. All four adjusted segment EBDAs grew:

Natural Gas Pipelines is the company — roughly two-thirds of revenue and the entire growth narrative. Adjusted EBDA rose 6% on higher contributions from El Paso Natural Gas, the KinderHawk gathering system, Tennessee Gas Pipeline, and the Texas Intrastate system. The volume table underneath is the confirmation: natural gas transport volumes up 3% to 49,273 BBtu/d, "primarily due to LNG deliveries on TGP and increased demand for services on our Texas Intrastate system," and gathering volumes up 14%, "primarily on our KinderHawk system." When management says the gas business "is benefiting from increasing LNG exports, rising power demand, and industrial expansion," those two volume lines are the receipts.

Products Pipelines is the quarter's accounting puzzle. Adjusted EBDA grew 9% on "favorable commodity pricing," but GAAP segment EBDA collapsed 40% to $172 million under the $138 million legal, environmental, and other accrual — the quarter's one large Certain Item. Volumes were soft across the board (refined products −3%, crude and condensate −11% on lower Bakken gathered volumes and the Double H conversion to NGL service), so the honest read is a segment whose economics improved on price while its reported number took a one-time hit.

Terminals grew adjusted EBDA 15% on expansion projects placed into service, higher commodity prices, stronger coal and petroleum-coke handling, and higher Jones Act tanker rates — the most diversified beat in the portfolio. GAAP EBDA of $385 million flatters it with the $71 million gain on the Tampa dry-bulk sale to Watco; strip that and the segment still grew double digits.

CO2 was the standout at +35%, on "higher commodity prices and higher crude and NGL volumes." SACROC oil production rose 11% to 20.05 MBbl/d, realized oil fetched $68.65 per barrel (up from $67.74), and realized NGL prices jumped 11% to $34.48. This is the one segment where Kinder Morgan takes commodity exposure rather than a fee — and this quarter, that exposure paid.

For the annual mix, the FY2025 10-K breaks revenue by segment (the quarterly release does not): Natural Gas Pipelines $11.0 billion of $16.9 billion total, Products Pipelines $2.7 billion, Terminals $2.1 billion, and CO2 $1.2 billion. Two-thirds gas, and the backlog says more gas is coming.

The Margin Story​

The operating margin printed an identical 25.6% in both third quarters — revenue and operating costs grew in lockstep — so the full 1.8 points of net-margin expansion came from below the operating line. Mechanically: interest down $26 million (the August refinancing — $1.15 billion of 5.55% notes due 2036 and $600 million of 6.15% notes due 2056 — replaced commercial paper and maturing debt at a lower run rate even as total debt rose), other income up $82 million on the divestiture gain, equity-investment earnings up $10 million, and the tax rate down 2.6 points.

On pricing: Kinder Morgan's realized-price language this quarter is all commodity pass-through, not tariff power — "favorable commodity pricing" in Products, "higher commodity prices" in Terminals and CO2. That is the fee-based model working as designed: most of the book is contracted capacity where volume, not price, is the variable, and the commodity upside concentrates in CO2 and the marketing-sensitive lines. The margin story to watch is therefore not price-over-volume but volume-over-fixed-cost — and with transport volumes +3% and gathering +14% against a largely fixed pipeline cost base, the operating leverage is doing its job.

The One Big Question: Can Kinder Morgan Build $14.4 Billion Without Stretching the Balance Sheet?​

The backlog added $5.4 billion net of $700 million placed in service — a single quarter of contracting equal to roughly a third of annual revenue. Two new final investment decisions anchor it: the Southeast Connector ($3.1 billion KMI share, 2.6 Bcf/d from Marcellus/Utica to the Southeast, phased from late 2030) and the Permian Link ($1.6 billion KMI share of a $4.2 billion project, 2.8 Bcf/d serving new power generation for an A-rated hyperscaler, due Q3 2030). Add the Western Gateway refined-products pipeline to Arizona and California (35.1% KMI, expected 2029), and the question is funding, not demand.

The funding math for the quarter:

Capex is running 32% above last year while FCF after dividends printed a $(120) million deficit — the backlog is already consuming more cash than the business produces after the dividend. Management's answer is the balance sheet: leverage ended at 3.5 times, "at the low end of our targeted range" and down from 3.8 times at year-end 2025, and KMI just termed out $1.75 billion of debt in August. The company now expects to beat its full-year Adjusted EBITDA budget by more than 6% (above $9.1 billion against an $8.6 billion budget) and its Adjusted EPS budget by more than 13% (above $1.54 against $1.36).

The prize for funding it: the $13.7 billion take-or-pay portion of the backlog is expected to generate a first-full-year Project EBITDA multiple of approximately 5.7 times — about $2.4 billion of incremental annual EBITDA, or 26% on top of the $9.2 billion trailing-twelve-month base. That multiple is the number to hold management to: contracted, take-or-pay cash flows at 5.7x turn a funding gap into a compounding machine, but only if the 2029–2030 in-service dates hold and the permits arrive. "The strong interest from our customers in developing additional natural gas infrastructure continues to grow," in CEO Kim Dang's words — the demand signal is the least uncertain part of this story.

Tracking a $75.4 Billion Balance Sheet in Plain Text​

A pipeline company's accounts are a maze of joint ventures, fair-value adjustments, and Certain Items — which is exactly why double-entry modeling clarifies them: every dollar must reconcile, so the $71 million divestiture gain cannot hide inside operating income and the $138 million accrual cannot vanish into a segment total. Read how we model every company for the shared conventions; note that income is negative (credit) and expenses positive (debit) in Beancount, so the transaction below nets to zero:

; Check: −4,531 + 1,566 + 949 + 628 + 190 + 121 − 83 − 231 − 19 + 430 + 190 + 26 + 764 = 0 ✓
 
2026-09-30 * "Kinder Morgan, Inc." "FY2026Q3 Income Statement"
  Income:Revenue                         -4531 MUSD  ; total revenues (the release prints the total only)
  Expenses:CostOfRevenue                   1566 MUSD  ; costs of sales
  Expenses:OtherNet                         949 MUSD  ; operations and maintenance — the filing's own line
  Expenses:OtherNet                         628 MUSD  ; depreciation, depletion, and amortization — the filing's own line
  Expenses:SellingGeneralAdministrative     190 MUSD  ; general and administrative
  Expenses:OtherNet                         121 MUSD  ; taxes, other than income taxes
  Income:OtherNet                            -83 MUSD  ; other income, net — income, a credit, inside operating income (includes the $71M Terminals divestiture gain, a Certain Item)
  Income:OtherNet                           -231 MUSD  ; earnings from equity investments
  Income:OtherNet                            -19 MUSD  ; other, net — income, a credit
  Expenses:Interest                          430 MUSD  ; interest, net
  Expenses:IncomeTax                         190 MUSD  ; income tax expense
  Expenses:OtherNet                           26 MUSD  ; net income attributable to noncontrolling interests, deducted as the filing does
  Equity:Adjustments                         764 MUSD  ; net income attributable to Kinder Morgan, Inc. offset (RE set by balance assertion)

The one balance-sheet number that tells the narrative is property, plant, and equipment: $38.0 billion at the end of 2024, $39.3 billion at the end of 2025, $40.9 billion now — $2.9 billion of steel in the ground in 21 months, with $14.4 billion more contracted behind it. The ledger also shows the other side honestly: long-term debt of $31.3 billion against that asset base, and a September balance sheet that carries $918 million of cash against $63 million at year-end — the August bond raise, sitting in the till waiting to become pipe.

The Multi-Year Arc​

Revenue is compounding at a double-digit trailing pace ($15.1 billion → $18.3 billion in under two years), net income faster still ($2.6 billion → $3.6 billion, +38%), and the asset base grows in lockstep while leverage falls — net debt to Adjusted EBITDA improved from 3.8 times to 3.5 times even as absolute debt rose, because EBITDA grew faster than borrowing. This is the ledger version of the backlog story: every dollar of new pipe so far has arrived with contracted cash flow attached. The dividend was just raised 2% to $1.19 annualized, and nine-month free cash flow of $2.21 billion covered $1.98 billion of dividends paid — the payout stays inside what the pipes produce.

The Verdict: Bull vs. Bear​

Bull Case

• The $14.4 billion backlog at a 5.7x EBITDA multiple implies ~$2.4 billion of incremental annual EBITDA — 26% growth already contracted, mostly take-or-pay, mostly serving power demand that AI data centers make structural.
• Leverage is falling while the build accelerates (3.8x → 3.5x), and 2026 guidance was just raised on every metric that matters: Adjusted EBITDA >6% above budget, Adjusted EPS >13% above, leverage 0.2 turns better.
• All four segments grew adjusted EBDA in the same quarter — Natural Gas +6%, Products +9%, Terminals +15%, CO2 +35% — with CO2 showing the commodity kicker still works when prices cooperate.
• The dividend ($1.19 annualized, ~2% growth) is covered 1.1x by nine-month free cash flow after capex ($2.21 billion FCF vs. $1.98 billion paid), leaving the payout safe while the backlog funds itself through operating leverage.
• LNG and power-demand volumes are visible in the meter readings, not just the commentary: gas transport +3%, gathering +14%, with the Plantation North expansion ($500M+, Haynesville to Gulf Coast LNG) completing by year-end.

Bear Case

• FCF after dividends was negative $(120) million in the quarter and capex is up 32% — the backlog consumes cash years before it produces it, and the two mega-projects do not deliver until 2029–2030, an eternity for execution risk and permitting delays.
• The $138 million Products Pipelines accrual is labeled one-time, but legal and environmental charges have a habit of recurring in the pipeline business; GAAP Products EBDA fell 40%, and volumes (refined −3%, crude −11%) were weak underneath the pricing benefit.
• Management's demand language never quite says demand exceeds supply — "continues to grow" is robust-demand wording, not sold-out wording — so the backlog could slow as fast as it grew if hyperscaler power plans pause.
• Interest coverage is thinning in absolute dollars: $1.75 billion of new 5.55–6.15% notes locks in ~$100 million of annual interest that the 5.7x project multiples must clear before shareholders see a dollar.
• The stock already prices a record: with net income +38% on a trailing basis and guidance raised, any slip in the 2029–2030 in-service dates reprices the backlog premium fast.

Our Take

Kinder Morgan is no longer a yield stock with a pipeline attached — it is a contracted-growth company that happens to pay a dividend. The $14.4 billion backlog, 92% of it natural gas and three-quarters of it power-linked, converts the AI electricity thesis into take-or-pay cash flows at a 5.7x multiple that equity markets would happily pay 10x for. The quarterly funding deficit is real but manageable at 3.5x leverage with guidance rising. The ledger says buy the pipe, not the commodity: every line that matters — volumes, EBDA, PP&E, leverage — points the same direction. This is the company.