The body blows keep coming for Kinder Morgan (KMI). On Wednesday, the company reported a loss of $0.29 a share on revenue of $3.64 billion. Analysts forecast earnings per share of $0.18 on $3.9 billion in revenue.
"We are pleased with KMI's business performance for the year, especially in light of a tremendously challenging commodity environment, and we are glad to have generated the greatest amount of annual distributable cash flow in the company's history along with a 7% increase in our DCF per share year over year," said Richard D. Kinder, executive chairman. "However, we were disappointed by KMI's stock performance, which declined 65% during 2015."
Shares closed down 4.6% Wednesday but turned positive in after-hours trading as the company tried to reassure analysts and investors on the strength of its underlying business amid a challenging environment.
In the earnings release, Kinder Morgan made some revisions to its 2016 financial projects, which were intitally announced in early December. The company now expects to generate $4.9 billion of distributable cash flow.
It also reduced its growth capital budget to $3.3 billion, representing a $900 million reduction, in an effort to focus its project backlog on the "highest return opportunities," CEO Steven Kea said during the earnings call. The highest return opportunities are generally those with after-tax returns in the mid-teens, Kinder said later in the call.
The Texas-based company operates over 84,000 miles of pipelines that transport natural gas, crude and refined petroleum and carbon dioxide.
Kinder Morgan was an early champion of the master limited partnership structure but switched to operating as a C-corp in 2014. Since then, the company's long-term investors have been bruised many times over. Some investors, generally lured to the MLP structure for tax-advantaged income, were hit by a high tax bill due to the company's change in structure.
Furthermore, investors were hurt by the broader selloff in oil and gas markets as energy prices have been on a steep decline since late 2014. And because bad news comes in threes, the company in December announced plans to slash its quarterly dividend by 75% to $0.125 in an effort to shore up its balance sheet without having to access capital markets. Since that announcement, shares of the company have fallen 20% and are now trading around $12.
"Reducing the dividend was not an easy decision, but given the strength and sustainability of our business, and the cash generated thereby, I believe as the largest shareholder you will see KMI emerge as a stronger company with a strengthened balance sheet, higher coverage on the dividends we pay, and with no need to access equity markets for the foreseeable future," Kinder said during the company's earnings call.
Even so, the company was pressed by a shareholder about the future of the company's dividend, especially in light of its shift from being an MLP.
"The whole thing is to create value for shareholders and [if] the best way to do that is distributing it in dividends, that's what we're going to do," Kinder said. "If the best way is to delever the balance sheet, that's what we're going to do."
For now, Kinder Morgan's remaining investors may not want to hold their breath.
This post was updated to include commentary from the earnings call.