Kinder Morgan Inc - Class P (KMI) — Q3 2025 Earnings Call Transcript

Thank you, Michelle. As usual, before we begin, I'd like to remind you 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 Exchange Act of 1934, as well as certain non-GAAP financial measures. Before making any investment decision, 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 SEC for important material assumptions, expectations and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. I think we all recognize the positives and negatives of publicly traded companies. One of the biggest pitfalls is the undue concentration on quarter-to-quarter or even day-to-day issues, many of which are relatively inconsequential in terms of the long-term success of the enterprise. With that in mind, I thought I'd take this opportunity to stress two important substantive factors that will impact the future of Kinder Morgan, the natural gas story and the long-term strategy of our company. Obviously, the two are intimately related. On the natural gas demand front, there are two huge drivers. The first is the continued rapid growth in LNG feedgas demand, driven by the enormous expansion of export facilities, primarily along the Gulf Coast. While industry experts differ somewhat, there's a pretty broad consensus that demand will at least double between 2024 and 2030. In fact, S&P's Commodity Insights recently estimated that increase at 130%, which implies a demand of 31 to 32 Bcf a day in 2030. As an example of this growing demand, six LNG projects have reached FID so far in 2025. Feedgas demand for those facilities alone, when completed, will be 9 Bcf a day. Now there's more variance in assessing the impact of the second driver, which is the increasing demand for electricity, primarily to serve AI data centers. There will clearly be huge additional demand for electricity, but how much of that will be captured by natural gas? Let's look at the alternatives. Certainly, renewables will play a major role but can't handle the entire load given AI's needs for uninterrupted power 24/7, not just when the sun is shining and the wind is blowing. But can't this be fixed by pairing wind or solar farms with massive batteries to store power and release it in a steady stream when needed? Well, that sounds intriguing, but there are serious drawbacks to this option because batteries are expensive and limited in the time they can cover. And renewables of the size to serve AI centers require enormous space. A recent article in the New York Times estimated that to continuously produce just one gigawatt, a solar farm would need 12.5 million solar panels, enough to cover 5,000 football fields, and wind turbines would require even more space. Another source of power is nuclear, which generates steady power from a relatively small footprint, but this is an industry that unfortunately has been basically dormant for over 40 years, and new nuclear facilities are very expensive and would likely take 7 to 10 years to come online. This means that AI sponsors would not have the facilities when needed and would be gambling billions of dollars that the demand will still be there a decade or so from now. That leaves natural gas, which is abundant and reasonably priced, and the infrastructure to produce power from natural gas is relatively quick to build. Recently, as I've just outlined, is why we believe that AI data center needs will supplement, in a very meaningful way, the tremendous increases in LNG feedgas demand. In combination, the two drivers will ensure a huge and growing market for natural gas in the years and decades to come. Now let me conclude by again emphasizing the long-term strategy at Kinder Morgan. We are a prolific generator of cash and are fortunate to have the majority of our assets employed in a true growth segment of the energy business, namely the transportation of natural gas. These two characteristics dovetail nicely. The tremendous growth in natural gas demand drives the opportunity for expanding and extending our pipeline and terminal networks and adding new facilities, as evidenced by the $9 billion plus of projects already approved by our Board, and we generate the cash internally to fund those projects while maintaining a healthy and modestly growing dividend. Now to be clear, we have to complete these projects on time and on budget, but our track record in that regard is good, and we're benefiting from a federal regulatory process that is more supportive of projects like ours. While our base business is relatively flat, these capital projects will drive substantial growth in EBITDA and EPS for years to come. This is a simple but, in my mind, very compelling strategy. And with that, I'll turn it over to Kim.

Okay. Thanks, Rich. We're pleased to report another strong quarter with EBITDA up 6% and adjusted EPS growing 16% year-on-year. These results reflect the strength of our underlying business and the continued execution on our growth projects. We currently expect to exceed our full year budget due to the contributions from the Outrigger acquisition. This outperformance would be greater if not for lower than budgeted D3 RIN prices and RNG volumes. Currently, the RNG volumes are much closer to budget, but RIN prices remain weak. The natural gas segment, which accounts for two-thirds of our business, is outperforming its budget even excluding Outrigger. Our expansion backlog remained flat at $9.3 billion, with the approximately $500 million of new projects offset by projects placed in service. The backlog multiple continues to be below six times, consistent with our disciplined approach to capital deployment. The mix of new projects added to the backlog this quarter is split roughly 50% natural gas, primarily supporting power generation, and 50% to refined product tankage. Looking ahead, our opportunity set remains exceptionally compelling. We're actively pursuing over $10 billion in potential projects, primarily in natural gas, underscoring the continued demand for our services and the strength of our platform. As I mentioned last quarter, the scale of opportunities we’re evaluating today is comparable to when our backlog stood at just $3 billion, highlighting the consistency and the resiliency of our growth pipeline. Our gas infrastructure, more than 66,000 miles of pipeline connecting all major basins and demand centers, positions us as a critical player in energy infrastructure. Today, we transport over 40% of the natural gas in the United States, including more than 40% of the volume headed to LNG export facilities, 25% of the gas fueling U.S. natural gas power plants, and 50% of the gas exported to Mexico. Looking forward, our internal projections estimate a 28 Bcf a day increase in natural gas demand by 2030, driven primarily by growth in LNG exports as well as power and exports to Mexico. Wood Mackenzie forecasts a similar trend, projecting 22 Bcf a day of growth in overall natural gas demand. With our strategically located assets, we are well positioned to capture a meaningful share of this expansion. Our current $9.3 billion backlog is a strong foundation for long-term high-quality growth. A very significant portion of this backlog is supported by take-or-pay contracts, providing both stability and visibility into future cash flows. And as we continue to advance our development pipeline, we expect to convert a portion of the $10 billion opportunity set into additional backlog, further reinforcing our growth trajectory. We remain confident in our strategy, our execution, and our ability to deliver long-term value for our shareholders. And with that, I'll turn it over to Tom Martin to walk through the business performance in more detail.

Thanks, Kim. Starting with the Natural Gas business unit. Transport volumes were up 6% in the quarter versus the third quarter of 2024, primarily due to LNG deliveries on Tennessee Gas Pipeline, new contracts from expansion projects placed into service on the Texas Intrastate system, and increased Permian deliveries to Waha and Mexico on our El Paso natural gas system. Natural gas gathering volumes were up 9% in the quarter from the third quarter of 2024, with growth across all our G&P assets, the largest impacts from our Haynesville and Eagle Ford systems. Sequentially, total gas gathering volumes are up 11%. We experienced a significant ramp from our producer customers during the quarter to meet the growing LNG demand. The gathering volume growth trend continues in the early days of the fourth quarter, most notably on our Haynesville system as it is approaching new daily volume records in October. For the full year, we now expect the gathering volumes to average 5% above 2024. And looking forward, we continue to see significant incremental project opportunities across our natural gas pipeline network to expand our transportation and storage capabilities in support of the growing natural gas market. For example, we are exploring more than 10 Bcf a day of natural gas opportunities to serve the power generation sector. In our Products Pipelines segment, refined product volumes were down 1% in the quarter compared to the third quarter of 2024. For the full year 2025, refined products volumes are forecasted to be about 1% higher than 2024 and in line with our budget. Crude and condensate volumes were down 3% in the quarter compared to the third quarter of 2024. More than all of that decline is driven by taking Double H out of service earlier this quarter for the NGL conversion project. On Monday, Kinder Morgan and Phillips 66 launched a binding open season for transportation service on the Western Gateway Pipeline, a newly proposed refined products pipeline system that will facilitate the movement of products from origin points in Texas to key downstream markets in Arizona and California with connectivity to Las Vegas, Nevada. This open season is scheduled to run through December 19. Following the successful open season, the Western Gateway Pipeline and KMI's SFPP East Line will be jointly owned by KMI and Phillips 66. We believe this project provides an attractive refined products alternative for markets in Arizona and California, given the decline in California refining market. In our Terminals business segment, our liquids lease capacity remains high at 95%. Market conditions continue to remain supportive of strong rates and high utilization at our key hubs in the Houston Ship Channel and New York Harbor. Our Jones Act tanker fleet is fully leased today through the remainder of 2025. Assuming likely options are exercised, the fleet is 100% leased through 2026 and 97% leased through 2027. We have opportunistically chartered a significant percentage of the fleet at higher market rates and extended the average length of firm contract commitments to nearly four years. The CO2 segment experienced a 4% lower oil production volume, 4% higher NGL volumes, and 14% lower CO2 volumes in the quarter versus the third quarter of 2024, with the full year 2025 oil volumes forecasted to be 4% below 2024 and 1% below our budget. With that, I'll turn it over to David Michels.

Thank you, Tom. During the quarter, we are announcing a quarterly dividend of $0.2925 per share or an annualized $1.17 per share, which is a 2% increase compared to our 2024 dividend. For the third quarter, we reported a net income attributable to KMI of $628 million and an earnings per share of $0.28, consistent with the results from the third quarter of 2024. The previous year's figures included advantageous mark-to-market effects from hedges and a one-time non-cash tax benefit, both classified as certain items. When excluding these items, our adjusted net income and adjusted earnings per share rose by 16% year-over-year, showcasing strong double-digit growth. This increase was driven by higher contributions from our natural gas expansion projects that have commenced operations, the Outrigger acquisition, and robust demand for natural gas capacity and related services across our natural gas operations. Turning to our balance sheet, we have maintained a disciplined approach to capital allocation, resulting in a stronger financial position. Our net debt to adjusted EBITDA ratio improved to 3.9 times at the end of the third quarter, down from 4.1 times at the end of the first quarter, shortly after the Outrigger acquisition. Year-to-date, our net debt has risen by $544 million. To break it down, we've generated $4.225 billion in cash flow from operations, paid out $1.95 billion in dividends, and allocated $2.245 billion in total capital. The Outrigger acquisition accounted for $650 million, while other items generated about $75 million in cash, contributing to the $544 million increase for the year. Rating agencies have acknowledged our improved financial standing, with Fitch upgrading our senior unsecured rating to BBB+ in August. Both S&P and Moody's already had us on a positive outlook, and we anticipate a favorable outcome in that regard soon. As Kim mentioned, we expect to surpass our 2025 budget, which aimed for a 4% growth in adjusted EBITDA and a 10% increase in adjusted earnings per share compared to 2024. Given our outperformance, we anticipate even greater year-over-year growth. As stated last quarter, the budget reconciliation bill offers significant tax benefits for us, mainly due to full expensing of investments. Furthermore, recent modifications to the corporate alternative minimum tax are expected to yield considerable tax savings starting in 2026. We are therefore positioned for a very strong full year 2025. We are set to exceed our budget and achieve double-digit earnings growth. We have approved additional high-return projects to foster future growth, strengthened our balance sheet for improved credit ratings, and expect significant cash flow advantages from tax reform to increase investment capacity. I will now pass it back to Kim for Q&A.

Okay. Michelle, you'll come back on and we'll take questions.

I wanted to go back to your growth outlook and specifically the over $10 billion opportunity set in unsanctioned projects under development, up, I think, from the previous $7 billion to $11 billion range. What has driven the seemingly improved outlook over the past few months? How quickly do you think you can commercialize these growth opportunities? And where are you seeing the most interest for expansion projects amongst your customers?

Sure. So on the $10 billion, that's all the opportunities that we're pursuing right now. It's mostly natural gas. It supports the themes that we've mentioned here today, so export LNG, power, but there's also projects that support exports to Mexico and industrial growth. And as I said, the opportunity set is very similar to when our backlog was at $3 billion. So we haven't seen any diminishment in the projects that we're looking at. These projects are mostly across the Southern U.S. So they go all the way from Arizona to potentially Florida. And most of them are smaller in size, I'd say less than $250 million, but there are a few that are $1 billion plus. So it's all of the board. It's power in Arizona, power in Texas, power in New Mexico, power in Florida. We need more egress from all the producing basins, the Haynesville, potentially the Marcellus/Utica. We need more gas moving to LNG. As Rich said, we have 9 Bcf of gas demand from the projects that have FID-ed recently. So I mean, it's across the board. And then today, we have potential projects we're working on with respect to Western Gateway. So there's a lot of different opportunities out there.

And on that last point, Kim, following this week's announcement of your open season for Western Gateway, can you talk about your project positioning relative to 1 Oak's competing Sunbelt project? And assuming that Western Gateway solicits sufficient commercial interest during the open season, can you talk about potential gating factors, regulatory or otherwise, that Kinder and Phillips may need to address before the project can be sanctioned?

Sure. In terms of competition, their pipeline is limited to the Phoenix market, whereas we supply Phoenix from both the West and the East. Our proposed project with P66 would allow us to reverse our West line and construct a new pipeline from Borger to Phoenix. This would enable us to transport barrels from the East to Phoenix and reverse our West line to potentially send barrels into the California and Las Vegas markets. From our view, this is a beneficial project for Arizona, a growing market, as it enhances our capacity to serve the state. Arizona will be less reliant on California, especially with some refineries in California closing down, which could also lead to more barrels being available for California if there are further closures. This project is advantageous because it connects multiple markets rather than focusing on just one. Regarding the open season ending on December 19, we will need to secure various regulatory approvals afterward, aiming for a 2029 in-service date.

Just want to follow up on some of the comments you had said there with KMI seeing an opportunity set more robust at any time in the company's future. And I just wanted to, I guess, see if we could expand upon that in any way. And just wondering how you think about the landscape given Kinder's competitive positioning. It seems like it's a competitive market out there. And any thoughts that you could provide around that? And I guess, what could be the cadence of how this capital could fall into plan at a high level over time?

Yes. I discussed some of the background on the $10 billion in opportunities. Regarding competition, we recognize that we won't win every project, but we aim to secure our fair share. Our competitive edge comes from our established presence, which allows us to build on existing opportunities and offer services that others cannot, including storage. Ultimately, this sets us apart from our competitors. Additionally, we have a strong record of completing projects on time and within budget, which is crucial for our customers, especially in the data center and power sectors. Predicting the timeline for bringing these projects to final investment decision is challenging, so I can't provide a precise forecast. However, I believe we will have significant projects ready for final investment decision in 2026 based on our $10 billion backlog.

Got it. That's very helpful. And then just a smaller question for me as it relates to the guide. It just seems like the language changed a little bit with how much you're going to exceed the guidance by Outrigger in the 2Q versus 3Q, and it seems like it's a little bit less at this point. Just wondering what other, I guess, changes in the backdrop you see versus the 2Q?

Yes. I mean there was a slight change on that, and it's really related to the RNG volumes and the RINs price weakness.

Could you provide more detail on the emerging opportunities related to the shadow backlog? You've mentioned some examples, both small and large, but could you break it down regionally? We've observed some recent developments, including a privately backed pipeline FID in the Gulf Coast. Could you discuss the power opportunities in Texas and the backlog potential in the Southwest? Additionally, considering what your peer has announced recently, how do you view the future of the gas sector in the El Paso system?

Yes, I believe there is ongoing power development, primarily for data centers, although there are other factors influencing this growth, such as coal retirements. Some of these retirements have been delayed, but others are still occurring. In Texas, we see a need for more peaker plants to support renewable energy. We're noticing similar trends in New Mexico and potentially in Arizona, where some announced projects may not serve certain areas. Colorado is showing some activity as well, and there are possibilities for more developments in Arkansas and Florida. Additionally, we see opportunities to expand from the Haynesville area to transport more gas to the market and increase volumes from the Marcellus and Utica regions. There are numerous opportunities available, particularly in storage, as there is a growing demand for it. We are exploring chances to expand our storage capacity and new greenfield projects.

So one thing I'll add, especially out West, is we have strong connectivity to Mexico. So when you think about the power demands there, those are also rising, and not only from the base organic power, but Mexico also is evaluating their own data centers. Our footprint, especially out West, is very well connected along those lines. And then when you look out in the Southeast, you've seen the IRPs that have been put out by all the various states. Clearly, there's demand that's coming. As you all know, we're well positioned in that market to try and capture some of that growth. When I go to the Gulf Coast, we continue to debottleneck the plumbing to be able to get the molecules from the supply zones to the consuming markets. I think that's something you can kind of take away on things that we're working on. And then all of this gets put together when we evaluate storage and how to integrate storage and then supply access to these consuming markets. Those are kind of the big themes that we're seeing on the horizon.

Got it. And if I can nitpick a little bit, I know you just alluded to the Southeast, opportunities on SNG, does that line up with what we're seeing right now in the generation resource planning? I mean, obviously, they've upticked it pretty meaningfully here of late. Is that presently reflected? Or is there a little bit of a mark-to-market to happen on your side? And then also on the Western Gateway, if you could just clarify what the ultimate economics are on your side or at least the total dollars are?

I'll take the first question and hand it over to Kim and Mike for the second one. Regarding the Southeast, the $10 billion that Kim mentioned accounts for some of the IRPs in that region. This reflects the infrastructure we see as necessary. To address the first question, that is a portion of the $10 billion. Now I'll pass it to Tim and Mike for the second part.

In terms of the cost to build that pipeline, we won't discuss that because there is a competitive project out there, and we don't want to compromise our position at this time.

I wanted to ask about Hiland Express, the NGL conversion project. Just in terms of where do you stand on committed initial volumes? And where do you think that can go? And then I noticed in the press release, you talked about potentially some takeaway out of the Powder River as well. So I'm wondering if you can expand on that.

Yes. So sticking to our previous discussions, it's on track. We're on track to be ready first quarter next year for our initial commitment. Obviously, you all know we're also in a very aggressive competition with the incumbent there. So I won't get too much into the details on what's next. That being said, we have some assets that we're effectively repurposing to be able to position ourselves to draw incremental barrels to the pipeline. And I will leave it at that until we actually have the next set of announcements to make, hopefully very soon.

Okay. Fair enough. And then I wanted to ask you about the behind-the-meter opportunities. I know in the past, you've talked about maybe coming up with a solution with partners. So I just want to see where that stands and if that can be a meaningful driver and if that's part of that $10 billion.

If you're talking about investing in power, I think the answer is still that's not something that we're interested in doing. I think we've got plenty of opportunity, plenty to take rates over in our existing infrastructure business. That is what we are good at, what we know how to do. Therefore, the growth that we're projecting is very high-quality growth, as I said, largely backed by take-or-pay contracts. I think maybe where we're missing a little bit is I think in the past, what we said is if there was a data center or something that wanted us to invest for some reason, maybe we might make a very small investment there. But that would just only be to facilitate a project getting done. That is not where we want to invest our dollars. It is unlikely that we invest behind the meter.

But to add on to what Kim just said, we are looking at working with our partners to supply gas in certain instances to be able to support a consortium of folks to provide reliable power. I mean, I think that's the way you would look at our participation in the opportunity. We would be looking to build the infrastructure to support that.

I'm going to go to the shadow backlog too, I guess, not to keep running through the same thing. But I guess I just want to ask one more way. When you're looking at this $10 billion, how much of this is, look, it's a competitive environment. We'll see what we win. We have a lot to bring to the table versus really waiting for actually that demand to materialize, the next LNG FID, some larger power build-out across the Southeast, etc. Maybe just what are the kind of buckets between the two in terms of what you see in front of you?

Yes. I mean these are projects where we are actively talking to customers about them. So I think we're having conversations with people. We are putting together estimates on what things would cost. We're looking at returns. These are all things that are active conversations internally.

That's fair. Maybe just a follow-up second question. I appreciate the comments on the guide around the RNG side being softer. Can you talk about the rest of the business? I mean, gas was relatively strong. Any more kind of one-offs in there? Or is this a kind of healthier run rate?

I think gas remains very strong. We experienced a mild winter and summer, yet they are still set to exceed their budget, even excluding the Outrigger acquisition. The terminals are performing excellently this year and are expected to surpass their budget as well. The products segment is generally on budget, though slightly below, but it’s relatively minor. The areas of weakness are primarily in RNG and a bit in CO2.

I wanted to start with the 2026 outlook. I know we're going to be getting a formal update from you guys in a few weeks. But maybe just at a high level, if you could just talk about some of the variables you could see impacting the various segments? And maybe any reason 2026 growth wouldn't at least sort of match up the 2025 growth rate?

Well, I think we're going through a process right now. And so I think it's too early to talk about what the growth rates might be. But in terms of if you want to go tailwinds, headwinds, something like that, tailwinds, we've got expansion projects. You've got a full year of '25 that we'll get in '26. Then you've got partial year '26 growth projects. We've got contract escalators in our Terminals business and our Products business. Interest rates are coming down, so that should be a tailwind for us. We're not expecting significant increase in taxes given what we've seen on the Big Beautiful Bill and the bonus depreciation. As always, we see a little bit of decline potentially in oil volumes. What's unknown is, I think, commodity prices at this point in time. We'll just have to see where those come out.

Yes. Fair enough. Second one, if you could believe it, I do have another follow-up on the opportunity set. Just curious how we should think about the timeframe that either the $10 billion or the 10 Bcf a day captures. I'm asking from two different perspectives. To the extent these are all opportunities you're sort of chasing within the decade, is there an opportunity here to see investment per year CapEx go up above $3 billion? And then conversely, how should we think about your ability to maybe deliver more short-cycle cash flows? A lot of these projects later dated, they are great projects, but just curious if you could sort of fill the front end up more, too.

If you consider these, they will include both unregulated and regulated projects. The regulated projects now have a shorter time frame than before, which is beneficial. The FERC has eliminated 871, so that five-month delay is no longer an issue, and they are working hard to expedite permit approvals. This will shorten the capital cycle. The main constraint is likely to be compression, which may restrict how much we can reduce the timeline. Generally, FERC projects will take just over three years from sanction to service. We expect quicker capital turnaround on the gathering side for all the Texas intrastate projects and possibly in other states as well. Overall, we are likely to start filling out the future years, although we might see some near-term capital increases in 2027 and 2028. We have ample free cash flow and balance sheet capacity to accommodate any increases above $2.5 billion or $3 billion, just to provide a rough estimate. With $5.5 billion of DCF and $2.6 billion in dividends, this leaves us with $2.9 billion of cash flow to support expansion projects. Currently, our balance sheet stands at 3.9x leverage. Since every 0.1x equals $800 million, we are not aiming to reach 4.5x, which gives us about $3 billion of additional capacity. Over time, our debt-to-EBITDA ratio will decrease as we bring these projects online, increasing our balance sheet capacity. There is also attractive third-party capital available if we choose to pursue it. I am confident in our capacity to finance these expansions, which are solid return projects, and we will find ways to execute them without compromising our balance sheet.

Just wanted to follow up on Western Gateway, and I know you don't want to say a total capital cost, but my questions are more on the structure. So if Phillips is building the new pipe, and I think your capital investment is just a line reversal and maybe some tankage. Is it fair to think your portion of the CapEx is much smaller in this project? And then the second question is the structure of the JV. So you're contributing SFPP, and they build Western Gateway. Is it roughly like a 50-50 JV from there?

Yes. I think it's going to be around a 50-50 JV. And so, yes, because we're contributing assets, our capital expenditure for the new assets would be a little bit less than what Phillips 66 would have to contribute.

Okay. Great. And then second question, I think Kim, you referred to potential TGP projects that would add egress out of the Appalachia region. I think there's been a few capacity reservations for projects. Can you just talk about what you think is possible or doable to increase capacity out of Appalachia on TGP?

Yes. This is Sital. Yes, we've been working diligently on trying to find ways to get incremental egress out of the basin. As these consuming markets develop with the demand that Rich and Kim talked about earlier, it's incumbent on us to get incremental gas out of the basin. In terms of what that capacity amount is, that is still being worked on. But I'd say just rough numbers, north of 0.5 Bcf is what we're trying to get, but still early, and I take that with a grain of salt until we're done with all the diligence.

Maybe going over to the Haynesville. It sounds like volumes continue to grow there. I think on the last few calls, you guys had mentioned you're getting close to capacity. Maybe an update there? Is this from your largest customer on that system? Or are you seeing private start to flow volumes as well?

Yes. As Tom mentioned earlier, we are almost at capacity and are just waiting to break the record, which we hope will happen any day now. This includes our largest customer, as well as several private companies that are also looking to increase their drilling in response to the incoming demand. We anticipate a significant increase next year in the Haynesville.

Yes. Quarter-over-quarter, Haynesville volumes have increased by 15%. We are observing our customers adding these volumes. Last quarter, we announced a $500 million investment in Haynesville, which includes significant treating capacity and additional pipeline capacity to support our customer volumes.

Got it. That makes sense. And then maybe moving over to...

We expect the Haynesville to be one of the strongest and likely the fastest-growing basins. Our internal projections indicate it will grow to nearly 11 Bcf a day between 2024 and 2030, potentially reaching around 23 Bcf a day in production. We are currently identifying opportunities and anticipate continuing to find chances to invest in the Haynesville and to transport gas from it.

Got you. No, that all makes sense. I appreciate the color. And then maybe one on the Permian West expansion open season. It looks like that gas is heading westbound. Just curious if that could be upsized if the demand is there? And then maybe some color on the customer mix. There's obviously some data centers where that expansion is heading. Is there demand also beyond Texas as well?

Yes. Look, I mean, I believe you're referring to the smaller open season that we've got out there going west. That is to serve power. As the open season closes, we'll evaluate the bids and look at what we can do to accommodate the capacity. Obviously, in and around that area, and then if you kind of flip over one state into New Mexico, there's a lot of activity on the power side. We're just going to have to evaluate how the bids come across.

Just one quick one here for me. I would just be curious as to what you guys think the longer-term market dynamics are in California for the refined products market and whether or not there's upside potential for Western Gateway or any other future growth into that market? Just any high-level thoughts you have.

Yes. I'd say we wouldn't want to speculate on the California markets and what's happening there. But if you think about our reversal of the West line and that volume needing now to be filled through the new gateway line into Phoenix, you've got this access into California. Depending on what that California refining market does, you've got the capacity across that West line to continue to grow with changes in that market. As we've talked before, you also have access beyond through our Calnev line into Las Vegas, Nevada.

I wanted to ask about the shadow backlog as well. You mentioned both large scale and smaller projects. I was hoping to get a bit more color on the larger projects. If I look at the backlog that you have right now in projects in execution, it's kind of three large projects that are all serving Texas and Southeast. Should we assume the larger projects in the backlog are kind of similar in markets they serve? Or is it kind of a bit different? I noted, for example, you mentioned Mexico a couple of times, wondering if that's one of the larger projects in the backlog.

All these projects are competitive, and that's why we've been broad in our description of the backlog. The larger projects in the backlog generally focus on supporting export LNG and power.

Okay. Understood. And then my other question is just on M&A. Given that we're starting to see, once again, a bit of a larger multiple dispersion between natural gas and liquids names and given you do have a decent-sized non-natural gas business. I wonder if there's opportunities out there or holds in the portfolio that you'd be interested in filling, especially if crude oil prices fall and some other companies become available.

So you're talking about buying? Okay. So look, I think acquisitions, M&A is always opportunistic. We will look at opportunities for assets that fit our strategy, which is owning energy infrastructure assets that are fee-based. We can do it on returns that we think are appropriate on a risk-return basis and do this while keeping our balance sheet metrics within 3.5x to 4.5x debt to EBITDA. Again, I think our view is there's unlimited capital for good risk-return opportunities. We will continue to look at those. We've done some in the recent past. We haven't done anything huge, but we did one at the beginning of this year in Outrigger and one last year as well. Those things are hard to predict. I think we either have the capital depending on the size or can find the capital to pursue those when they come about.

You guys got a great opportunity set in natural gas, but just kind of switching gears a little bit here to the CO2 business. At least one operator is talking about potentially using CO2 sweeps in some of these tight plays out in the Midland and Delaware basins and such. Is that something you guys have looked at? Does that represent a business opportunity for Kinder Morgan? Or do you need to see more proof of concept around something like that?

Are you talking about participating in that, Dave? Are you talking about supplying the CO2?

Either.

I think with regards to supplying the CO2, we certainly would be interested in that. I think in terms of the other side of that, we would have to look at that a lot more closely and really seriously look at the risk-return opportunities before we would consider investing.

Yes. My understanding is that it depends on how they frack that field initially to determine if they would be viable candidates for CO2. When venturing into something new, it's necessary to achieve a significantly higher return to offset the risks associated with a process that you haven't previously engaged in. While we are experienced in CO2, we have limited experience with flooding these previously fracked fields.

I just wanted to follow up on the comments that you've made about needing to build pipelines from kind of Tier 2 basins, not the Haynesville to the LNG that's coming online. One issue, I guess, that I had been thinking about is that it's a little unclear who would be willing to underwrite these contracts with the LNG builders kind of being linked to Henry Hub and the E&Ps maybe not wanting to take long-term contracts. So I was just wondering if you could give any color on if you see that being a constraint to these being built? And just if you think it will be a mix of end users, E&Ps, and marketers on those kinds of pipelines.

Yes, I believe the Eagle Ford is really well positioned among second-tier basins. This is advantageous for us given our strong presence there. I see potential for growth beyond current projections, and building infrastructure in that region is relatively straightforward. The Haynesville also has significant growth opportunities to support this. But, Sital?

Yes. When we look at this, I think as the markets start figuring out where they can actually get a molecule, that will drive it. The way I would answer the question right now is that would be driven primarily by the market pulling from the supply and then some of the producing basins complementing. It's going to take a little bit of both, especially in the second-tier basins. That's going to evolve over time as the plumbing gets discovered regarding how we can get gas, where you can source gas and how that moves through the networks to the grid, the pipeline grids to be able to get to the consumer.

Okay. Michelle, thank you very much, and everybody, have a good evening.