The Houston energy infrastructure giant reported income of $276 million, or 12 cents per share, off 37% from the Wall Street consensus and down 35% over the same period last year, partly due to one-time items including project write-offs. Sales also came in 14% below expectations at $3.19 billion and were down 11% over the first quarter of 2015.
Kinder Morgan's shares fell 2% in morning trading.
The company said it expects this year's Ebitda to come in 3% below its plan and distributable cash flow 4% below plan because of lower production activity in South Texas' Eagle Ford shale and bankruptcy of coal customers, including Arch Coal, Alpha Natural Resources and Peabody Energy.
Simmons & Co. , a unit of Piper Jaffray, wrote in a report Thursday that the Ebitda forecast paints a "sobering picture for the year" and called the lower Eagle Ford volumes "a bit shocking."
"KMI believes it can maintain its credit ratings, but Q1 results likely add more skeptics of this statement," Simmons analyst Brian Gamble said.
Kinder Morgan held its dividend flat at 12.5 cents, which it expects to keep through the end of the year. Jefferies analyst Christopher Sighinolfi doesn't expect the company to boost its payout until the first quarter of 2019, with Tudor, Pickering, Holt & Co. analysts expecting the company to use any excess cash flow to buy back shares.
The company also announced it was cancelling its $3.3 billion Northeast Energy Direct pipeline project because of insufficient commitments from electric utilities. It also cancelled its Palmetto Pipeline project after unfavorable action by the Georgia legislature regarding eminent domain authority and permitting for petroleum pipelines, CEO Steve Kean said in the statement. The cancelled projects contributed to its $4.1 billion reduction to its backlog.
Chairman Richard Kinder (pictured) sounded an optimistic note, saying that given the company's cash flow generation, it won't have to tap the capital markets this year. "This cash flow in excess of our dividends insulates us from challenging capital markets and significantly enhances our credit profile," he said.
Philip Adams, an analyst at bond research firm Gimme Credit, said the company's decisions to consolidate its master limited partnerships under one roof and slash its dividend are paying off, as it's able to self-finance a high-graded project portfolio with retained cash flow.