Kinder Morgan (KMI - Get Report) said Wednesday it delivered second-quarter earnings of $372 million, or 15 cents per share -- what analysts were expecting, but which disappointed investors by not raising the company's dividend.
The Houston energy infrastructure provider said its board approved a dividend of 12.5 cents per share, the same as the previous quarter. Kinder Morgan said it expects to pay out 50 cents per share this year and use the cash in excess of dividend payments to fund growth investments and strengthen its balance sheet.
The company's sales slipped by 13.7% in the second quarter to $3.14 billion, 8.4% lower than expectations, and by 10% for the first half of the year to $6.3 billion vs. $7 billion in the first half of 2015.
The company's stock slid 1.6% in after-hours trading to $21.74 after closing at $22.09 on Wednesday, up more than half a percentage point.
Chairman Rich Kinder said on a conference call that the company met guidance, showing that its assets are consistent generators of cash flow "even at these times of volatility." He added that the company received regulatory clearance for its Trans Mountain expansion project in Canada -- final approvals should come in December -- and that it sold $175 million in noncore assets. Those actions allowed the company to improve its balance sheet, which could lead it to end the year at 5.3 times debt to Ebitda vs. the 5.5 times that was budgeted.
"We're not sitting on our hands," Kinder said. "We hope to get back as quickly as we can to return more money to our shareholders."
CFO Kimberly Dang wouldn't comment on how shareholders would benefit, whether it would be through a dividend boost or a share buyback. "We're not committing to a specific method at this time," she said.
KMI slashed its dividend by 75% in December 2015, shocking analysts and investors alike and sending its stock down to as low as $12.01 per share.
KMI said some of the moves it has made to enhance its credit profile this year including its agreement to partner with Southern (SO - Get Report) through the anticipated sale of half of the Southern Natural Gas pipeline system for $1.47 billion plus Southern's share of the pipeline's debt and its completed sale of its half interest in its $500 million to-be-constructed Utopia pipeline project to Riverstone Investment Group LLC for half of the project capital costs plus an amount in excess of its share of project capital.
Management said on the conference call that more joint ventures out of its backlog might be coming but wouldn't be specific. Previously management said that the Elba and Palmetto projects were possibilities and intimated on Wednesday that Trans Mountain could be too.
Dang said she didn't expect to need to tap the capital markets this year for 2016 projects, although the company might do some pre-funding for 2017. "But not at today's prices," she said.
CEO Steve Kean said the company continues to see strong demand for natural gas, particularly from power plants but also from exports to Mexico.