Kinder Morgan posted record Q2 net income of $867M (+21%) and EPS of $0.39 as gas transport volumes rose 7% and higher oil prices lifted its CO2 unit; management now expects to beat its 2026 Adjusted EPS budget by more than 12%.
Revenue
$4.5B
+10.8% YoY
Net income
$867M
+21.3% YoY
Diluted EPS
$0.39
+21.9% YoY
Operating margin
30.1%
Record second quarter, driven by gas demand and higher oil prices
Kinder Morgan earned $867 million of net income for its shareholders in Q2 2026 (three months to June 30), up 21% from $715 million a year earlier, on revenue of $4,477 million (+10.8%). Earnings per share rose to $0.39 from $0.32. On the company's adjusted basis, which strips out accounting gains and losses on hedges that haven't settled yet plus one-off tax items, EPS rose 32% to $0.37 and Adjusted EBITDA rose 12% to $2,199 million. Both were second-quarter records, according to the earnings release.
Growth came from two places. More natural gas moved through the pipes: transport volumes were up 7%, driven by LNG export deliveries, Texas demand, exports to Mexico and power demand in Arizona. Commodity-price-linked businesses also did well. Earnings in the CO2 segment, which produces oil in West Texas, rose 43% on higher oil prices and output.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Revenue
$4,477M
$4,042M
+10.8%
Operating income
$1,346M
$1,152M
+16.8%
Operating margin
30.1%
28.5%
+1.6 pts
Net income attributable to KMI
$867M
Read 0 community reports on Kinder Morgan, or write your own.Write a report
Operating margin = operating income divided by revenue: the share of each sales dollar left after running the business, before interest and tax.
Why revenue moves with oil and gas prices but profit mostly doesn't
Most of what Kinder Morgan does is charge a fee to move or store someone else's gas, fuel or oil. That fee is set by contract or regulated tariff, so it depends on volume and rates, not on what the commodity sells for. Some units, though, buy a commodity and resell it, for example on the Texas intrastate gas system. When prices rise, both the sale price and the purchase cost go up, so revenue swells without much extra profit.
This quarter shows it. Revenue rose $435 million. The 10-Q attributes $422 million of that to higher product sales "driven by higher commodity prices and volumes," and $138 million to higher fees for services, mainly from gas pipeline volumes and new projects. Cost of sales, what KMI paid for the commodities it resold, rose $194 million over the same period. Operating income grew $194 million, less than half the revenue gain.
The main exception is the CO2 segment. It produces oil rather than buying it, so higher prices go straight to profit. That is why that segment's growth stands out below. Its realized oil price was $73.78 a barrel, against $67.60 a year earlier.
Segment performance
KMI measures each segment by EBDA: earnings before depreciation and amortization, a proxy for the cash each business generates before corporate costs, interest and tax. The table uses the company's adjusted figures, which exclude unrealized hedge gains and losses.
Segment (Adjusted EBDA)
Q2 2026
Q2 2025
YoY Change
Natural Gas Pipelines
$1,461M
$1,347M
+8.5%
Products Pipelines
$339M
$289M
+17.3%
Terminals
$309M
$300M
+3.0%
CO2
$207M
$145M
+42.8%
Natural Gas Pipelines (about 63% of adjusted segment EBDA). The biggest gain came from the Midstream group, whose reported EBDA rose $54 million (10%). The 10-Q credits "higher volumes and increased demand for our services on our Texas intrastate systems," higher volumes on the KinderHawk gathering system in Louisiana, and assets acquired in North Dakota (Hiland). Gathering volumes, gas collected from wells before it enters the big pipelines, rose 26%. The interstate East group added $16 million, from finished expansion projects and lower maintenance costs. That was partly offset by "lower pricing on short-term firm service contracts driven by a decrease in market volatility." The West group added $14 million. KMI also bought the Monument Pipeline system serving the Houston area on May 1 for $503 million.
Products Pipelines. Earnings rose even though volumes fell. Refined product volumes fell 5%, blamed on "temporary West Coast supply disruptions" and higher fuel prices. Crude and condensate volumes fell 16%, mostly because the Double H pipeline was switched from crude to natural gas liquids. The gain came from the Southeast Refined Products unit, up $40 million (53%) on "higher butane blending spreads" and "favorable commodity prices at our Transmix processing operations." Put simply, this segment's rise came from pricing, which may not repeat, rather than from moving more barrels.
Terminals. Liquids terminals rose $12 million (7%) on higher rates and ancillary fees at the Houston Ship Channel, partly offset by a customer's refinery that closed in 2025. Jones Act tankers (US-flagged ships, all on term charters) rose $5 million on higher charter rates. Bulk terminals fell despite higher volumes because the prior-year quarter included one-time items. Liquids utilization, the share of storage tanks under contract, slipped to 93.0% from 94.4%.
CO2. Oil production rose 10% to 28.04 thousand barrels a day. Output at SACROC, the largest field, rose 15%. Oil and gas producing activities rose $42 million (40%) on "higher realized crude oil prices and volumes." Energy Transition Ventures (renewable natural gas) rose $18 million on more RNG production and sales of renewable fuel credits.
Why GAAP and adjusted earnings grew at different rates
GAAP net income rose 21%, while adjusted net income rose 33% (to $821 million from $619 million). The difference is mainly the base period. In Q2 2025, reported earnings included a $96 million net benefit from "Certain Items," mostly mark-to-market gains on hedges that hadn't settled. KMI strips these out of its adjusted numbers. In Q2 2026 that benefit was only $46 million. Tax also played a part. Income tax expense rose to $272 million from $177 million, taking the effective rate to about 23% of pre-tax income from about 19%. The 10-Q attributes this mainly to "an increase in deferred tax liability for Texas Margin Tax as a result of the enactment of changes to tax rules." KMI treats a $37 million tax charge as a Certain Item. Interest cost fell $27 million, which helped. The 10-Q cites higher capitalized interest (interest on money spent building projects is added to the project's cost instead of being expensed) and lower rates on its interest-rate swaps.
Cash, spending and debt
Cash from operations rose 19% to $1,960 million. Capital spending, though, rose to $982 million from $647 million, "primarily driven by expansion projects in our Natural Gas Pipelines business segment," so free cash flow slipped 2% to $978 million. That covered the $665 million of dividends paid, leaving $313 million. KMI no longer reports distributable cash flow (DCF) in its release. Free cash flow (FCF) is the cash measure it uses now.
Net debt was $32,027 million at June 30. Divided by trailing-12-month Adjusted EBITDA of $9,000 million, that gives 3.6 times, down from 3.8 times at year-end. Net debt-to-EBITDA, roughly the number of years of earnings needed to repay debt, is the main leverage gauge for pipeline companies. Management calls 3.6x "the low end of our targeted range."
Project backlog
The backlog of approved expansion projects stood at $9.6 billion, down $0.5 billion from Q1. This is because about $660 million (KMI's share) of projects entered service this quarter. They were: the Cumberland lateral to a new Tennessee Valley Authority gas-fired power plant, the Hiland Express crude-to-NGL conversion, and the Gulf Coast Express expansion, which adds about 570 million cubic feet a day of Permian gas capacity. The board also gave contingent approval to almost $400 million of projects not yet counted in the backlog. About 92% of the backlog is natural gas, and more than 60% serves power generation and local gas utilities.
Excluding CO2 and gathering projects, KMI expects the remaining $8.5 billion to produce first-full-year Project EBITDA at about 5.6 times the capital spent. Equivalently, each dollar invested should return roughly 18 cents a year in EBITDA once running. The two largest pending projects are the roughly $1.8 billion (KMI share) South System Expansion 4 and the $1.7 billion Mississippi Crossing. FERC issued their final environmental impact statement on June 26, and KMI targets in-service dates from 2028 into 2029.
Takeaway: Headline revenue growth mostly reflects higher commodity prices and is largely cancelled out by higher purchase costs. The durable story is gas volumes (+7% transport, +26% gathering) running through a network that is still expanding. Oil prices and blending spreads added extra profit in CO2 and Products this quarter, and those gains are less repeatable than the gas-pipeline growth.
Outlook
KMI's 2026 budget called for Adjusted EBITDA of $8.6 billion, Adjusted EPS of $1.36, dividends of $1.19 per share and year-end leverage of 3.8 times. After the first half, management now expects to beat budget by more than 5% on Adjusted EBITDA and more than 12% on Adjusted EPS, and to finish the year at 3.6 times leverage.
First-half Adjusted EBITDA was $4,738 million, so the company needs about $3.9 billion in the second half to reach $8.6 billion. The first half is usually stronger because winter gas demand falls in Q1, so this gap alone doesn't signal a slowdown. Two things to watch. First, how much of the CO2 and Products upside survives if oil prices ease; KMI's CO2 hedges for the rest of 2026 cover 23.15 thousand barrels a day at $64.54. Second, whether SSE4 and Mississippi Crossing get their FERC certificates on the schedule management described. These two projects are central to 2028–2029 growth.