Kinder Morgan Q1 2022 Earnings Call Transcript

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Provided by Quartr
April 20, 2022

There are 14 speakers on the call.

Operator

Good afternoon, and welcome to the Quarterly Earnings Conference Call. At this time, I would like to inform all participants that today's call is being recorded. If you have any objections, you may disconnect at this time. You have been placed on a listen only mode until the question and answer session of today's call. I would now like to turn the call over to Mr.

Operator

Rich Kinder, Executive Chairman of Kinder Morgan. Thank you, sir. You may begin.

Speaker 1

Okay. Thank you, Michelle, before we begin, I'd like to remind you, as I always do, that KMI's earnings release today and this call include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934 as well as certain non GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosures on forward looking statements and use of non GAAP financial measures set forth at the end of our earnings release as well as review our latest filings with the we will not materially from those anticipated and described in such forward looking statements. Let me begin by today, we formally announced our dividend increase for 2022, taking the annual payout to $1.11 That's the 5th consecutive annual increase. Also, as Steve Cain and the team will tell you, the year is off to a good start.

Speaker 1

Now I want to talk about broader issues that impact all of us. Since our last call in January, seismic events have occurred. The Russian invasion of Ukraine has shaken the world order as we know it, with a dramatic impact on the economy of Europe and indeed the entire world. Predicting how this whole tragic situation will be finally resolved is far beyond my capabilities, but I'm pretty certain The impact on the energy segment of the economy will be significant at least over the next several years. This crisis has demonstrated the continued dependence of the world on fossil fuels, especially natural gas, and the inability by the frantic efforts of Europe to wean itself from its overwhelming reliance on Russian natural gas.

Speaker 1

Beyond that, we are shown once again how tight the world market is for oil, natural gas, NGLs and even coal as we look at the dramatic escalation in prices since the war began in late February. What does this mean for the energy space in America? In my judgment, the crisis plays to our strengths. The U. S.

Speaker 1

Is a reliable supplier with the ability to grow its production modestly in the near term and more robustly in the intermediate term. We operate under a transparent legal system and we have technical expertise from the wellhead to the burner tip that is unmatched anywhere in the world. For all these reasons, the United States will be a major part of the solution to adequately supply the world with oil and natural gas it needs to surmount The present problem. In particular, the U. S.

Speaker 1

Will be a major supplier of additional LNG to Europe to replace at least in part Russian Gas. I anticipate that all of our present LNG export facilities will be running at capacity for the foreseeable future and the contracts necessary to support the construction of new facilities The federal government will not properly expedite the permitting of these new facilities, but I'm reasonably hopeful that at some point this administration The impact of these developments will benefit the Midstream Energy segment and Kinder Morgan specifically in of the gas going to LNG export terminals. As volumes increase, throughput will increase as will the need for selective expansions and extensions of the network. In short, it's a good time to be long natural gas infrastructure. Steve?

Speaker 2

All right. Thanks, Rich. So after wrapping up a record year financially in 2021, we're off to a strong start in 22 with strong performance in our base business and attractive opportunities to add growth. We're keeping our balance sheet strong, Exceeded our plan in the Q1, and even though it's early in the year, we are projecting to be above plan for the full year. In addition to commodity price tailwinds, we experienced very strong commercial performance in our gas business with continued improvement in our contract renewals, in our Bakken, Haynesville and Altamont assets and increasing interest in new Permian transportation capacity.

Speaker 2

On the Permian, we are working on the Commercialization and development of compression expansions on our PHP and GCX pipelines. While we will need to do a small amount of looping, most of the expansion can be accomplished with additional horsepower. Compression expansions are low risk from a siting and permitting perspective, and they are very capital efficient, though they do come with a higher fuel rate for the customer. Most importantly in today's environment, compression expansions allow for speed to market. Once we have contracts and make FID, we believe we can get to in service in about 18 months.

Speaker 2

We believe the market will need that capacity in that timeframe and see 1 or both of these expansions as the near term solution pushing out our potential greenfield 3rd pipeline further in time. Combined, the 2 expansions can add 1.2 which we acquired in 2021 helped us with our strong winter performance and continues to perform above our acquisition model. Our CO2 business was aided by commodity prices and also operational outperformance versus our plan. We continue to advance our 3 renewable gas projects, which we picked up in the Kinetrix acquisition last year, and we are advancing additional opportunities in our Energy Transition Ventures Group. Our products pipelines were modestly above plan for the quarter.

Speaker 2

And while terminals misplanned by a bit, we started to The good recovery in our Jones Act charter rates and continued strong performance in our bulk terminals business. For the balance of the year, commodity prices we expect continued strength in our base business, but we also expect to experience some negative impact from cost pressures due both to additional maintenance and integrity work that we added to the plan for this year we have both planned for the year. In summary, we're doing very well. With that, I'll turn it over to Kim.

Speaker 3

Okay. Thanks, Steve. I'll please go ahead. Thank you. Thank you.

Speaker 3

Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 4

Thank you. Thank you.

Speaker 3

Thank you. Thank you. Thank you.

Speaker 4

Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 4

Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 4

Thank you. Thank you. Thank you.

Speaker 3

Q1 of 2021, we are

Speaker 4

pleased to report that we are reaffirming

Speaker 3

our expectations by increased LNG deliveries, generally colder weather, partially offset by the continued decline in Rockies production and a pipeline outage on please go ahead. Deliveries to LNG facilities off of our pipes averaged approximately 6 2,000,000 dekatherms per day, that's a 32% year over year decline in the range of 20 1. Our market share, as Rich mentioned, remains around 50%. Exports were up slightly when compared to Q1 of 2021 as a result of 3rd party pipeline capacity added to the market. Overall deliveries to power Plants were up 5%, and we believe that natural gas power demand the market is becoming more inelastic relative to coal.

Speaker 3

Deliveries to LDCs And Industrials also increased. The overall demand for natural gas is very strong. Both our internal and WoodMac numbers Our natural gas gathering volumes were up 12% in the increase by 10% for the full year, that's a number. In our Products Pipeline segment, refined products volumes were up 7% for the quarter Compared to the pre pandemic levels using Q1 of 2019 as a reference point, road fuels were down about 0.5%, so essentially flat, while Jet was down 18%. We did see a decrease in the monthly growth rate as we went through the quarter, Crude and condensate volumes were down 4% in the quarter versus the Q1 of 'twenty one.

Speaker 3

Sequential volumes were flat please note that with the reduction in the Eagle Ford offset by an

Speaker 4

additional cost reduction in the Eagle Ford offset by an additional

Speaker 3

cost reduction. You exclude tanks out of service for required inspection utilization is please go ahead. Our rack business, which serves consumer domestic demand was up nicely in the Q1. Our pulp facilities, which are driven more by refinery runs, international trade and blending we've seen some green shoots in our Marine Tanker we will continue to expect the business with all 16 vessels currently sailing under firm contracts and day rates are still improving, but still lower relative to expiring On the bulk side, overall volumes increased by 19% driven by pet coke and coal, which more than offset lower steel and ore volume. In our CO2 segment, crude volumes were essentially flat compared to to the Q1 of 'twenty one and NGL volumes were up 7%.

Speaker 3

CO2 volumes were down 9%, but that was due to the expiration of the carried interest following payout on a project in 'twenty one. On price, we saw very nice increases in all of our primary commodities. Overall, we've had a very nice start to the year. For the Q1, we exceeded our DCF plan by 4%. We estimate that roughly half of that performance was due to price and specifically quantify the outperformance because, 1, it is relatively early in the year and 2, there are a lot of moving pieces, commodity prices, gathering volumes, inflation, regulatory demands and interest rates to name a few.

Speaker 3

We expect the upside to outweigh the downside. And with that, I'll turn it to David Michael.

Speaker 5

All right. Thank you, Kim. So for the Q1 of 2022, we are declaring a dividend of $0.2775 per share, which, As Rich mentioned, it's $1.11 annualized and 3% up from our 2021 dividend. For the quarter, we generated revenues $4,300,000,000 which is down $918,000,000 from the Q1 of last year. However, when you exclude the large nonrecurring contribution from Winter Storm Yuri from last year, our revenue would have been higher this quarter versus last year.

Speaker 5

And our net income was $667,000,000 down from the Q1 of during the Q1 of 2021 would have been $569,000,000 So relative to that recurring amount, we generated $98,000,000 or 17% higher net income this quarter versus last year. Our DCF performance was strong. Natural Gas segment was down $797,000,000 but again, the winter storm contribution from last year, which was over $950,000,000 in the Q1 of 2021, led to the majority of that decline this quarter. Otherwise, we had nice outperformance Our natural gas segment, driven by contributions from our Stagecoach acquisition, Tennessee Gas Pipeline contributions, our Texas intrastates as well as greater volume on KinderHawks. The product segment was up $36,000,000 driven by increased refined product volumes And favorable price impacts partially offset by higher integrity costs and our terminals business up $11,000,000 greater contributions from our bulk terminals, driven by higher pet coke and coal volumes as well growth in our liquids terminals business due to expansion projects, contributions and an unfavorable impact from Winter Storm Yuri during 2021.

Speaker 5

And those were partially offset in the terminal segment by lower contributions from our New York Harbor Terminals and our Jones Act Tanker Business. Our CO2 segment was down $83,000,000 and more than all of that decline is explained by the segment's contribution from winter storm during 2021. Other than that, the CO2 segment is up nicely year over year, mainly driven by commodity prices. Total DCF The EPS generated in the quarter was $1,455,000,000 or $0.64 per share. That's down from last year.

Speaker 5

But again, excluding the non Current contributions from Winter Storm Uri, our DCF, would be up $203,000,000 or 16% higher compared to the Q1 of 2021. Moving on to the balance sheet, we ended the quarter with $31,400,000,000 net debt with a net debt to adjusted EBITDA ratio of 4.4 times. That's up from 3 point 9 times at year end 2021, but excluding the nonrecurring EBITDA contributions from Yuri, the year end ratio would have been 4.6 times. We ended the quarter would have been 4.6 times when we ended the quarter favorable to our year end recurring metric. Net debt during the quarter increased $191,000,000 And here's a reconciliation of that change.

Speaker 5

We generated $1,455,000,000 of DCF. We paid out $600,000,000 of dividends. We contributed $300,000,000 to joint ventures and to growth capital investments, we had $250,000,000 of increased restricted deposits, Which is mostly due to cash posted for margin related to our hedging activity. And we had a $500,000,000 working capital use, which is Not uncommon in the Q1 when we have higher interest expense payments, property tax bonus payments, and we also have a rate case And that explains the majority of the $191,000,000 for the quarter. And with that, I'll turn it back to Steve.

Speaker 2

Okay. Thanks, David. Michelle, if you'd come back on and open it up for questions. And I'll just point out we've got our entire senior management team around the table here, so we'll be passing the mic as you have questions about our different segments and their performance and outlook, etcetera. So Michelle, open it up, please.

Operator

Thank you, sir. At this time, if you have any questions or comments, you may press star 1. Please unmute your phones and state your first and last name and company name when prompted. Our first caller is Jean Ann Salisbury with Bernstein. You may go ahead.

Speaker 6

Hey. I just wanted to ask about the potential compression expansion. How are customers comparing the compression expansion option versus a new build? Are the rates similar? Obviously, you mentioned that the time line to market will cost us higher.

Speaker 6

Just wanted to understand which was kind of more attractive to customers.

Speaker 2

Very good. Tom Martin, President of Our Gas Group.

Speaker 7

Yes. I mean, can't get too specific about overall rates because it's competitive. I think the key is speed to market and that's the message that we're hearing from our customers is that getting this in service in 2020 we really help alleviate a containment issue that we're Starting to see now and certainly expect to get much worse as we get into 2023. So not ready to call this When yet, clearly. We've got a lot of work to do, but getting some good feedback.

Speaker 6

Great. That's helpful. And I guess on that topic, is 18 months to add compression and some looping kind of longer than a similar project in the past, is this due to supply chain issues going on? Or am I just too demanding?

Speaker 7

Yes. I mean, it may be somewhat longer, but we've made some mitigating steps. We've taken some mitigating steps to help Make that better than it otherwise could have been. But I think in these times, that's probably indicative, if not longer.

Speaker 6

Okay. And then just one more follow-up on this, if I may. Are you seeing any movement from kind of the people that have not traditionally signed up for long term contracts, like the privates to sign up this time given more constraints on flaring and everything? Or do you think it's going to likely be the same mix of customers as in the past?

Speaker 7

Again, hard to speculate specifically on customers, but I think I would say it's a broader set of customers in general than what we may have seen on the Greenfield projects. So speaking, I think really to the point you're making is that there are there's a broader set of customer interests this time.

Speaker 6

Great. That's all for me. That's super helpful. Thank you.

Operator

Thank you. Our next caller is Colton Bean with Tudor, Pickering, Holt and Company. Sir, you may go ahead.

Speaker 8

Good afternoon. So you all mentioned seeing higher costs in the release. Can you just elaborate on where you're seeing those costs

Speaker 2

And so that's not an inflation thing. That's just a scope of work thing. And it's not an Ongoing or recurring, but we're doing some work there that we'll be doing this year and probably next year. That's one category. The second thing is We haven't experienced a great deal of inflation to date.

Speaker 2

We experience as normal when commodity prices are up. You See it in the oil field, right, but commodity prices are up. The revenues are up to go with it. So we're seeing some there. The other places where we're seeing inflation, we projected a little inflation, but the places where we've actually experienced that are obviously fuel for our trucks, Okay.

Speaker 2

And for our other equipment. So fuel prices are up, those prices are up. Related hydrocarbons or composites like lubricants is also up. And some materials, steel cost for certain equipment has come up and even though raw steel has come down a little bit, then down then up a little. So it's some materials, equipment, lubricants, fuel.

Speaker 8

Great. Appreciate that. And then Rich mentioned the need for incremental U. S. LNG.

Speaker 8

Are there any optimization opportunities available to

Speaker 4

you all at Elba Island or alternatively, if market interest has increased, could that

Speaker 8

be a potential divestiture candidate?

Speaker 7

Yes. So the current project is fully utilized by our customer. There certainly is an opportunity need to do an expansion there, small scale expansion. We had those discussions a couple of years ago. Obviously, Look what is happening now.

Speaker 7

We're dusting that off again. Again, very early days to say whether there real potential there, but overall, the market opportunity suggests that maybe something worth looking at.

Speaker 2

And Colton, the thing I'd add to that is just that a lot of the way we're participating in this LNG growth opportunity, both What has come to pass already and what we believe is still to come is off of our network. And so we can participate in that market and the growth we will continue to be by serving them and serving them well with our pipeline infrastructure and our storage assets along our network And particularly with a lot of that growth coming in Texas and Louisiana, where our footprint is especially robust. And so, ELBA is something we will evaluate, as Tom said, and we'll work with our customer on that. But really, a big play for us in the trend here is to be able to bolster what we do from a transportation and storage service provider standpoint.

Speaker 8

Got it. That's helpful. Appreciate the time.

Operator

Thank you. Our next caller is Jeremy Tonet with JPMorgan. Sir, you may go ahead.

Speaker 2

Hi, good afternoon. Good afternoon.

Speaker 9

Just wanted to see with the compression expansions, if you are able to provide any thoughts with regarding to capital outlay there for us to kind of frame it. You talked about being more capital efficient than a greenfield. And then at the same time as it relates to the new greenfield, does this really change, I guess, the pace of how you're exploring those? The pace of that project, given how it's going to take longer to build a pipeline today than it did in the past. And so presumably there's going to be need for incremental beyond these expansions pretty quickly, at which point the Permian Pass could service that need.

Speaker 7

Yes. Again, I don't think we want to get into capital discussion again in a competitive environment on the expansion project. But I think to your second point, yes, I think you're exactly Right. The market will fill up relatively quickly. We're estimating a greenfield Pipe will now be needed sometime in 2026 after all the expansions are done to fill the immediate need.

Speaker 7

And so with that, given the timeline on doing greenfield type projects, I mean that would lend itself

Speaker 9

Helpful there. And then just want to kind of pivot towards you discussed this GHG collaboration study with other partners in Midstream here. And just wondering if you could expand a bit about that, I guess, the objectives behind that and I guess what were some of the drivers to moving forward with that project?

Speaker 7

Yes. I mean, I think holistically, international LNG markets are driving the bus on getting RSG in lower methane intensity type volumes. And so we're certainly working with our good customer in support to be on specific assets at specific locations with hope that, that will broaden and ultimately support A certification process that will help your mark lower methane intense gas going to international markets.

Speaker 2

And Jeremy, I'd just add to that, that we have seen a bit of an inflection this year. We've been talking about our low methane emissions intensity And marketing that as part of our service offerings, and we've been doing that for a while. We got a deal last year, and we got another couple of deals following that, Got a tariff filing on TGP. There's all of a sudden an enormous amount of interest in it. And by our 5% of the natural gas produced in the U.

Speaker 2

S. Today could qualify. And if you take all their targets into count, you get up to a third. And so we think that this is going to be a point of distinction in the future, and we're seeing evidence of that now.

Speaker 9

Just to add on real quick there, do you see this as something that increases profit or is it cost of doing business or how do you think about?

Speaker 7

It's truly to say that I mean, I guess my thought is that the ancillary services that come out of responsibly so as some we'll take a look at the certification process as we go forward. I think right now it's more about identifying what we can do and what we can't do on a large scale in the near term and identifying we'll be able to find ways to harness that for the market.

Speaker 9

Got it. That's helpful. Thank you.

Operator

Thank you. Our next caller is Brian Reynolds with UBS. Sir, you may go ahead.

Speaker 10

Good afternoon, everyone. Maybe to start off on capital allocation, you talked about EBITDA guidance of Roughly $7,200,000,000 being favored to the upside versus the downside as we kind of sift through the global macro uncertainty. Curious given the change in the global macro since the Analyst Day, have any assumptions changed around capital allocation and the buyback commentary from January? I guess in other words, Have CapEx needs been pulled forward with the GCX and PHD expansions or the potential of the FID of new Permian pipe impacts Kinder's process around potential buybacks this year or next? Thanks.

Speaker 2

Yes. There's been no change in the principles. We are focused on making sure we keep the balance sheet strong and that we fund available capital projects that Good NPV at well above our weighted average cost of capital and returning value to shareholders with increase that we're talking about today as well as share repurchases. So we do have some additional capacity given our performance. We have some additional CapEx in our forecast, we went up a little over $100,000,000 from where we were in the budget, and we continue to look for those.

Speaker 2

But we're we'll continue to see the opportunity coming forward, we'll still have additional capacity beyond that. David, anything you want to add?

Speaker 5

No, I think you covered it.

Speaker 10

Yeah, that's super helpful. Maybe as a follow-up on the Ruby bankruptcy proceedings, just

Speaker 3

kind of curious if

Speaker 10

just the pipe for the long term for additional purposes and email for that. Thanks.

Speaker 2

Yes. So the overall message on Ruvi is the same as it's been for a long decisions here that are in the best interest of KMI shareholders. We're hopeful that as we enter into this new process that we're going to be able to work out reasonable resolutions. We continue to operate the pipeline and believe that's what makes sense in and so we'll continue to work in a constructive way with our counterparties.

Speaker 10

Appreciate the color. Have a good day everyone.

Operator

Thank you. Our next caller is Chase Mulvehill with Bank of America. You may go ahead.

Speaker 11

Good afternoon. I guess first question, I just wanted to come back to the natural gas egress discussion around the Permian. I think many investors thought that you'd probably see an announcement alongside today's results for relative expansions of GCX and Permian Highway. It does obviously sound like it's moving along, but I don't know if you'd be willing to kind of provide Maybe your thoughts around timing of when something could get officially sanctioned here. And then you said 18 months Kind of, I guess, to get in service with sanction.

Speaker 11

Are you ordering any long lead time items that could possibly move things up inside of 18 months. And then last one is just opportunities to expand or new expansions outside of kind of 42 inches pipes, do you see any opportunities there?

Speaker 2

I'll start and ask Tom to correct anything I get wrong here. But we're not yet talking about timing. I think it's fair to say the market is very interested and they see the wall coming in terms of capacity constraint. And so that has turned up the heat and turned up the volume on commercial discussions. And because of the time frame that's required and the time frame and the speed to market that we're able to offer, we like our chances very much in this discussion.

Speaker 2

But we're not going to project a particular time. We it didn't come alongside the announcement today because we get contracts before we go. And so we're working on that and we're working fast and hard on that. I'm not going to talk about specific commitments, but I'll just say that we've been obviously, we've not been Ignoring the supply chain challenges in the marketplace. And so we've made what we believe are appropriate mitigation steps to mitigate that risk for us.

Speaker 11

Okay. And any changes to when you think this bottleneck Really festers in the Permian. I think you said last earnings call, you said year end 'twenty three. Does that kind of still the timeline of when you expect to see a bottleneck?

Speaker 7

I think sooner, early later this year it begins in early 'twenty three. I mean you can look at just the financial basis markets and it gives you some insight into 2023 appearing to be more towards the train wreck than it is today. So yes, absolute need

Speaker 11

Okay. Last one on repurposing assets. Could you talk about opportunities that you see to repurpose some of your underutilized assets? And then do you think this could be either more near term opportunities or really just really long term opportunities you see to repurpose assets?

Speaker 2

We don't There's one project I can think of where we are actively looking at repurposing. It's not a huge part. I don't think you should count it as a huge part of our commercial activity right now, but it's something that we continue to evaluate.

Operator

Michael Lapides with Goldman Sachs. You may go ahead.

Speaker 12

Hey guys, thank you for taking my question and congrats on a great quarter. We're a year and 2 months removed or so from Yuri. Can you talk about what customers across the board, whether producers, utility, power generators, whatever, We're saying to you in terms of storage rates, meaning gas storage rates, the tenure of new gas storage contracts And whether there's a physical need for expansion of gas storage capacity.

Speaker 2

Good question.

Speaker 7

Tom, Marty? Yes. No, A lot of discussion in that area, and we have seen on contract renewals, a significant expansion on especially multi cycle storage rates, especially in Texas, but I would say really across the whole footprint. And I think there are opportunities to expand our storage facilities, especially in Texas. We're taking a hard look at doing that.

Speaker 7

And there seems to be a lot of interest in it. So on both the power customers as well as the local distribution Customers, especially in the state of Texas. I might add too, our Acquisition of Stagecoach was quite timely as well, kind of right in the middle of this whole trend. And As Steve said earlier, we're performing well over our acquisition model assumption on that asset and especially as we integrate that with our

Speaker 12

Got it. That's super helpful. Just curious, when you get an and I know it's going to vary by size, obviously, But when you get a customer or a series of customers interested in having you expand your existing gas storage facility, how should we think about just the process and the time line to actually physically be able to do so?

Speaker 7

Yes. I mean it depends on what Kind of an expansion we're talking about, if it's adding withdrawal capability or compression to add injection flexibility, that's probably It depends if it's a brownfields type opportunity or a greenfield opportunity. But I think that's generally, I would say, the time line I would think about as you talk about expansion opportunities.

Speaker 12

Got it. And then one last one and hate to do back to back here, but different topic. Just curious how you're thinking about growth in the Haynesville from here after a pretty solid start to the year, kind of what you think the trajectory is? And whether you think Haynesville takeaway towards the Gulf Coast starts to get tight whether you guys play a role in that.

Speaker 7

Yes. So, Lynn, we've certainly seen tremendous growth year over year, quarter over quarter In our gathering assets, I mean, about $300,000 a day quarter over quarter, and we're forecasting upwards of 0.5 Bcf a day Year over year, full year forecast 'twenty two versus 'twenty one. Yes, and you're absolutely right. I mean, I think as that Growth accelerates not only on our assets but other assets in the basin. Critical, I think there are some expansion projects that are probably more economical than an incremental greenfield, and there will be The need for incremental greenfield expansions out of that area as well, especially pointed towards the Gulf Coast for LNG export.

Speaker 7

So we certainly are looking at that. Don't have anything that we're anywhere close to Talking more about today, but certainly see that as a potential opportunity.

Speaker 12

Got it. Thank you, guys. Much appreciated.

Operator

Thank you. Keith Stanley with Wolfe Research, you may go ahead.

Speaker 10

Hi, thank you. I had 2 quick follow ups. First, Steve, you talked to the Elba expansion potential, maybe a long shot, but can you give an update on Gulf LNG As an export facility, I think it's fully permitted. Is that a project that's made any progress and any efforts there?

Speaker 2

As we've talked Not in the past. We have a regas customer at that location who is paying for that capacity. Obviously, in today's market, that's not in high use, not in use generally at all, but we have a customer and they're a paying customer and they reserved the capacity and we made a deal. Now we will work with that customer to see if there's something that would allow us to bring the potential for a brown field liquefaction opportunity forward, but we don't have anything to announce there today.

Speaker 10

Thanks. Second one, sorry, another Permian expansion question, but a little different, I guess, than your usual business model. But Since it's less capital intensive, how do you think about contract durations for a Permian gas Pipeline expansion, are you willing to go less than the 10 years you've historically targeted or maybe not even fully contracted?

Speaker 7

Yes. No, I mean, I think we're thinking minimum of 10 years and we will plan to sell all of this capacity. I think the market wants it. I think like honestly, We may very well be oversubscribed. So I think it's a good opportunity to fully sell the project out, both projects.

Speaker 10

Thank you.

Operator

Thank you. Becca Followill with U. S. Capital Advisors, you may go ahead.

Speaker 13

Hey, guys. Sorry, another Permian one. Acknowledging your comments, Steve, about that you're for some of these items that you might need, do you feel like that there is sufficient compression that either you have on hand or have ordered that you could do both of these expansions within 18 months assuming that you FID them?

Speaker 2

Yes. Again, we're reluctant we're in a very competitive situation, Becca. I think what it's fair to say is what I said, which is we prepared.

Speaker 7

Okay. Thank you.

Speaker 13

The second one is on a new Permian pipe. Just in light of the nationwide permit 12 process that's underway, do you feel like you could build a new pipe under that under NWP 12? Or do you like you would need to get individual water body crossings?

Speaker 2

Yes. So it's, first of all, really important And I know you're not asking about the compression expansions on this question, but one of the great things about these are that they are very permit light, Right. It's getting an air permit under a permit by rule arrangement at the TCEQ. We think we can avoid issues that would otherwise trigger a more active federal review by the Corps or anyone else. There's some good mitigation built into our plans to avoid endangered species, to avoid open water crossings, etcetera.

Speaker 2

So we've got all that worked out. Your bigger question though, Nationwide 12 has been open to And it's been attacked. There's a process underway right now at the federal level where a lot of open ended questions are being asked about should we Should we change that? Should we change the other thing? So there is some uncertainty around Nationwide 12 right now.

Speaker 2

No doubt about it. Hopefully, that uncertainty resolves itself as we get closer to needing to use it for something like a big new greenfield pipeline expansion. But we are, to be evaluating in other context with smaller projects where we may be using Nationwide 12, evaluating how we could get individual permits if need be. Now for the most part, what the core will point you toward is Nationwide 12, that's what it's there for, is that. But if we were, it's only prudent for us to evaluate if you end up in a problem there to have a Plan B.

Speaker 2

And so we're developing those planned fees.

Speaker 13

Perfect. Thank you.

Operator

Thank you. And at this time, we're showing no further questions in the queue.

Speaker 4

Please go ahead.

Operator

Thank you. This concludes today's today's conference call, you may go ahead and disconnect at this time.

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Earnings Conference Call
Kinder Morgan Q1 2022
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