Kinder Morgan (NYSE:KMI) released first-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.
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Access the full call at https://events.q4inc.com/attendee/866091806
Summary
Kinder Morgan reported a strong first quarter with adjusted EPS up 41% and EBITDA growing by 18%, driven largely by increased natural gas demand.
The company is acquiring the Monument Pipeline System in Texas for $500 million, which fits well with its existing network and is expected to close soon.
Kinder Morgan anticipates exceeding its EBITDA budget by more than 3% for the year, excluding contributions from the Monument acquisition, with strong performance in the natural gas segment.
The expansion project backlog increased to $10.1 billion, with substantial growth opportunities in natural gas pipelines, driven by increasing power demand and LNG exports.
Management highlighted the strategic positioning of their assets and strong cash flow, enabling financing of growth projects primarily through internal cash flow while maintaining a strong balance sheet.
Full Transcript
OPERATOR
Good afternoon and thank you for standing by and welcome to the first quarter 2026 earnings results conference call. Your lines are in a listen only mode until the question and answer session of today's conference. At that time you may press STAR followed by the number one to ask a question. Please unmute your phones and state your first and last name when prompted. Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to Mr. Rich Kinder, executive Chairman of Kinder Morgan.
Rich Kinder (Executive Chairman)
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 and Exchange act of 1934 as well as certain non GAAP financial measures. Before making any investment decisions, 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. Now, in preparing for this investor call, I look back at the text of the introductory remarks I've made over the past several years. Most of what I've said concerned the future of natural gas demand and the positive impact it has on midstream energy players like Kinder Morgan. In almost every case, the projections I made turn out to be understated. In other words, the demand for natural gas, driven primarily by growth in LNG feed gas demand and by increased utilization of natural gas for electric generation, has simply grown faster than we expected. Now I think events since the last call have made the outlook for growth even more positive. Regarding LNG demand, the recent events in the Middle east will clearly have substantial impact. While the ultimate outcome is certainly not clear at this point, the damage to Qatari liquefaction facilities and continued uncertainty regarding ship traffic through the Strait of Hormuz will lead to more preference for US Sourced lng. And the predictions for growth in gas powered electric generation have also increased. In a piece that surfaced just this week, S and P Global Market Intelligence reports that utilities plan to add a staggering number of 153 gigawatts of gas fired generation capacity in the next several years, primarily to serve data centers, with the bulk of this coming online by 2030. Now this is twice the estimate by the same group of one year ago and reflects plans to build about 210 additional natural gas fired facilities. Our Kinder Morgan forecast for overall US gas demand now extends through 2031 and estimates demand in that year of 150bcf a day, a growth of about 27% from this year. In short, the natural gas story has legs and Kinder Morgan's strong start to 2026 that Kim and the team will explain supports that view. While the old saying that rising tide lifts all boats has some applicability to this situation, there will clearly be some players who will benefit more than others from this positive story. I believe that the midstream sector as a whole will be one beneficiary and it offers a low risk way to invest in the growth story of natural gas given the prevalence of long term throughput agreements with investment grade credits underpinning the bulk of midstream assets. The INGAA Foundation, in a study released in March, estimates that North America needs 70 bcf a day of new gas pipeline capacity by the 2050 time frame and I believe Kinder Morgan will fare very well in this environment. Let me tell you why we have a superb set of assets located in the areas where gas demand is growing dramatically. Our strategy is to concentrate on expanding and extending those assets in an aggressive but disciplined manner. This means we will continue to identify and pursue the myriad of growth opportunities we are currently seeing and once undertaken, to complete the resulting projects on time and on budget. Because our cash flow is very strong, we will be able to finance these projects primarily with internally generated cash flow and I can promise you an intense and unrelenting focus on these unparalleled opportunities. This strategy will enable us to grow our EBITDA and EPS substantially over the coming years as these projects come online while still maintaining a strong balance sheet and growing our dividend. To me, that's a pretty good recipe for success, and with that I'll turn it over to Kim.
Kim
Okay, thanks Rich. We had a remarkable first quarter. The best I can remember with adjusted EPS up 41% and EBITDA growing by 18%. Importantly, every segment delivered growth versus 1Q25 and every segment outperformed our budget. Natural gas drove the most significant share of the outperformance, benefiting from winter storm Uri and the extended cold in the Northeast. These results reflect the value of our critical infrastructure and the essential role it plays in serving our customers, especially in periods of high demand. During the quarter we entered into an agreement to acquire the Monument Pipeline System in Texas for approximately 500 million these assets are a natural fit with our existing network, supported by long term contracts and acquired at an attractive multiple. We received early termination of HSR yesterday and expect to close by the end of the month on full year guidance. We now expect to exceed our EBITDA budget by more than 3%, excluding any contributions from the Monument acquisition. Most, but not all of that outperformance is attributable to the first quarter. Given that we are still early in the year, we've taken a somewhat conservative approach to our expectations for the year. However, continued outperformance in our gas group and or higher oil prices, which benefit our 10% unhedged oil in the CO2 segment, could provide upsides for the balance of the year. The growth in the overall natural gas market of over 36 bcf since 2016 has driven utilization on our five largest gas pipelines to over 90%. That utilization, combined with the projected growth in the market to approximately 150bcf a day in 2031 highlight both the need and the opportunity for expansion. Our expansion project backlog increased to $10.1 billion this quarter, up 145 million from the last quarter. We put approximately 230 million of projects in service and added 375 million in new projects, including 3 data center deals. The backlog multiple remains below 6 times with an average in service date of Q1.20. With respect to our 3 largest projects, which make up over 50% of the project backlog, we continue to be on time and on budget. Beyond our reported backlog, we're actively advancing a number of identified opportunities. Much of this activity is being driven by power growth and we expect a meaningful amount of these opportunities to convert into Approved projects during 2026. Our performance this quarter demonstrates the strategic positioning of our 78,000 miles of pipeline and 136 terminals and the tightness of energy infrastructure. As we look ahead, we're confident in our ability to complete our $10.1 billion backlog of projects, add to that backlog and deliver tremendous value to our investors. With that, I'll turn it over to dax.
Dax
Thanks Kim. Starting with the natural gas business unit, Transport volumes were up 8% in the quarter versus the first quarter of 2025, primarily due to increased LNG feed gas deliveries on the Tennessee Gas pipeline. Natural gas gathering volumes were up 15% in the quarter from the first quarter of 2025 and increased across most of our gathering and processing assets, with the largest impact coming from our Anne Hill system, Winter Storm Fern and the extended cold weather in The Northeast contributed to higher volumes as well. Looking forward, we continue to see incremental project opportunities across our natural gas pipeline network. For example, we're in various stages of development on projects to serve more than 10bcf a day of natural gas demand in the power generation sector and over 3bcf a day in the LNG sector. In our products pipeline segment, refined Product volumes were down 2% in the quarter compared to the first quarter of 2025, and crude and condensate volumes were down 12% in the compared to the first quarter of 2025, with more than all the decline in crude volumes explained by the removal of the Double H pipeline from service for NGL conversion in the third quarter of 2025. Excluding double H volumes in both periods, crude condensate volumes were up 2% in the quarter compared to the first quarter of 2025. With respect to Western Gateway, as noted in the joint release earlier in the week, KMI and Phillips 66 recently concluded a successful open season on the proposed Western Gateway pipeline system. The next step is to finalize definitive transportation service agreements with the shippers and hopefully acceptable joint venture agreements between KMI and P66. Assuming we can reach resolution on the noted definitive agreements, we would expect to FID the project sometime in the next few months. In our terminals business segment, our liquids lease capacity remains high at almost 94%, market conditions continue to remain supportive of strong rates and the utilization of our tanks available for use is approximately 99%. In our key hubs on the Houston Ship Channel and at Carteret, our Jones act tanker fleet remains exceptionally well contracted. Assuming likely options are exercised, our fleet is 100% leased through 2026, 97% leased through 2027 and 80% leased through 2028. We have opportunistically chartered a significant percentage of the fleet at higher market rates and have an average length of firm contract commitments of three years and over three years. When considering options that are likely exercised, the CO2 segment experienced 2% higher oil net oil production volumes compared to Q1 2025, led by a 5% increase in production. At Sacroc, NGL volumes were 5% higher and CO2 volumes were 1% higher. Notably, RNG volumes increased 63% due to greater uptime at our facilities and greater hydrocarbon recovery as the team running that business has made great progress in improving the overall operations of those assets. With that, I'll turn it over to David.
David
Thank you, Jax. So for the quarter we're declaring a dividend of 29.75 cents per share, which is $1.19 annualized and an increase of 2% over 2025. As you've heard, we had an outstanding first quarter generating net income attributable to KMI of $976 million, an EPS of 44 cents. These are 36 and 38% above the first quarter of 2025 respectively. These very impressive results reflect strong demand fundamentals across the country combined with strategically positioned assets and skilled execution by our colleagues to capture the associated opportunities and we saw growth across the business segments. The natural gas segment grew the most with colder than normal weather driving additional demand across already highly utilized natural gas midstream systems. But the segment also grew from factors other than the cold weather with contributions from growth projects, greater capacity, sales gathering volumes and utilization across numerous assets in products. We benefited from improved commodity pricing as well as the recovery of retroactive rate increases we booked following a favorable court decision. And in the terminal segment we had increased volumes and rates in our liquids business as well as the benefit of storage contract buyouts and we also saw increased volumes in our bulk business for the full year 2026. While it's still early in the year, we expect to be more than 3% favorable to our budgeted adjusted EBITDA. That's over $250 million of additional EBITDA contribution. We clearly outperformed in the first quarter and we expect additional outperformance for the rest of the year driven by continued strong demand for our natural gas midstream services. And the contributions from our Monument acquisition will be additive as well. Moving on to the balance sheet as we continue to grow our cash flow and remain committed to a disciplined approach to capital allocation, our balance sheet continues to strengthen our net debt to adjusted EBITDA ratio ended the quarter rounding down to 3.6 times which is down from the 3 point down from 3.8 times from the beginning of the year. Leverage of 3.6 times is the lowest for a Kinder Morgan entity since well before our 2014 consolidation transaction. That being said, we expect leverage to increase slightly by year end 2026, we expect increased capital spend during the rest of the year and we will only get a partial year EBITDA contribution from the Monument acquisition. Our budget had us finishing 2026 at 3.8 times and now we expect to end the year 2026 at 3.7 times due to our expected EBITDA outperformance and that keeps us comfortably below our midpoint of our leverage target range. During the quarter, net debt increased $82 million. And here's a high level walkthrough of that. We generated 1.49 billion of cash flow from operations. We spent 650 million on dividends, 800 million on total capital expenditures, and we had about $120 million of other uses of cash, which gets you close to the $82 million increase in net debt. The rating agencies have now fully recognized our strengthened financial profile with Moody's upgrading us to Baa1, which means we are now the equivalent of BBB at each of the three rating agencies. Additionally, the treasury issued guidance in March that will allow us to more fully take advantage of bonus depreciation across all of our assets. And that creates nice near term cash flow benefits which will generate additional investment capacity. With that, I'll turn it back to Kim.
Kim
Okay, Michelle, if you'll come on. And we will take questions.
OPERATOR
Thank you. At this time, if you would like to ask a question, you may press Star followed by the number one. To withdraw your question, you may press Star two. Please unmute your phones and state your name when prompted. Our first caller is Julian Demolin Smith with Jeffries. Your line is open, sir.
Luke
Hey guys, Luke on for, for Julian. Nicely done in the quarter. Just wondering if you could help frame the expected, you know, Western Gateway scoping in more detail, you know, around like maybe initial capacity diameter, maybe even total project costs and you know how capital contributions are likely to be allocated between the partners, just given the contribution of those assets you have. Thanks.
Kim
I'll say a couple of things and then Mike Garthwaite, if you want to add anything, I mean, I think as Dax noted in his comments, we've still got to negotiate the JV terms and that will obviously impact what our capital contributions are going to be. We expect that we will be making one, an asset contribution and two, we will be making cash contributions. But you know exactly how that's going to lay out and the total cost of this project and some of those details. I think we'll just leave that for once we get the project FID to get through these discussions. Assuming that we get through these discussions with our partner.
Mike Garthwaite
Yeah. And then I would say on the capacity side, I don't want to go into full detail as we work through and towards executing the final transportation service agreements. But you'll see the maps that we've consistently had out there are line from El Paso to Phoenix is a 20 inch line that we focused on and that gets the commitments that we've seen served plus some growth that comes along with that.
Luke
Awesome. Thank you, and separately, you know, you guys touched on this in your remarks. But maybe just looking to the Northeast in potential for maybe any expansion out there. You know, there's this growing recognition that we may need to see more gas egress into New England. Just curious for your thoughts on whether, you know, Tennessee could be a potential solution for that. And you know, if you would need at the, you know, state and regional level to take another look at growth opportunities in that part of the states,
Kim
the need is clearly there. But I mean, I think we've said this a number of times. We would have to have certainty, certainty on state permits and we would have to get the commercial support we need to underwrite a project. And last time, you know, the commercial support was a problem because the IPPs don't really have a way to get reimbursed when they, when they take on long term capacity agreements. So you either need the utilities or, you know, there's not a lot of commercial support out there. So I think we have to have the commercial support and the permit. Somebody's going to have to roll out the red carpet and you know, then I think we would love to take advantage of, of the opportunity. But you know, we've gone down that road once. We wrote off a fair amount of capital and I think that's not something that we are interested in doing again. Awesome. Thank you guys so much. Nicely done in the quarter.
OPERATOR
Thank you. Our next caller is Theresa Chen with Barclays. Your line is open.
Theresa Chen
Good afternoon. Can you talk more about the rationale behind the Monument pipeline acquisition? What kind of synergies or growth opportunities does it provide for your broader system that you would not have otherwise been able to achieve with your existing assets in the area alone? And when thinking about the valuation, can you define more precisely what medium term means in terms of achieving that? Less than 8.0 times multiple and does it require incremental capex? And if 8.0 is indeed medium term, what would be the current or LTM multiple? Just to provide context, as a marker for Texas intrastate gas assets in general.
Kim
And that's quite specific. Okay, so let me just say a couple of things about that $500 million. As we mentioned, we've got long term contracts that are underpinning this weighted average contract. Life on this is about nine years. It's over 90% utilities and industrials with good credit ratings. It integrates well into our existing assets. It does allow us to access some storage on our system that we previously couldn't access. There is some ongoing Expansion activity that will require some incremental capital after we close. And that expansion opportunity will come in over time. I think it comes in and starts later this year. And so I think that's what will help bring what is, you know, high single digits. Multiple down is coming from that, primarily from that expansion. There are some synergies with this, you know, associated with our storage. And I'll let Sethal talk about some of that. Yeah.
Sethal
Hey, Theresa. So just taking a step back, you know, a couple of things. One, the system really integrates well on a last mile basis. You know, it goes through Houston all the way down into the corpse corridor. So we see, you know, the demand profile there as very strong. It does bring an element of incremental low nitrogen supply in addition to what we were already working on, which, you know, over time we'll see the value of that low nitrogen. And then as Kim alluded to, you know, we have these assets touch our storage, our existing storage in ways that we can unlock certain value that an independent by itself cannot. So those are the, you know, the three primary drivers. And once again, it just, you know, it makes good map is like what I like to say. And it fits real well.
Theresa Chen
Thank you. And in terms of the early termination of the terminal service agreement at Pasadena in exchange for a series of lump sum payments, did you recognize a lump sum in the first quarter and if so, how much and what is the expected lost ebitda?
Kim
So let me say a couple of things on that. Yes, the lump sum gets recognized in the first quarter and I think this is, you know, just a great job by our terminals team. So we have the termination, they have gone out and they have backfilled all these tanks. And all these tanks are backfilled on a long term basis. Some people are taking them currently and then their rate steps up over time as we improve connectivity. And then one of the other customers is taking it in a year or so, 18 months. But in the interim, we are able to lease that capacity on a short term basis. So we've been able to backfill all of this. The rates will step up over time and largely offset the lost earnings. And with respect to, you know, that contract that was bought out, I think there was a little over a year remaining on that contract through 1Q20.
OPERATOR
Okay, thank you. Thank you. Our next caller is Brandon Bigham with Scotiabank. Your line is open, sir.
Brandon Bigham
Hey, good afternoon. Thanks for taking the questions. Just wanted to maybe talk a little more thematically about some of the dynamics you're seeing. In the refined products market thinking specifically around California and Western Gateway, how is demand evolving in light of, you know, the products pricing being seen on the screen is just the tightness in global markets. And just could that possibly create any expansion opportunity for the project?
Kim
I wouldn't say that it drives expansion for the project because I don't, I don't think the, you know, the overall demand necessarily is changing California significantly. What this, you know, what I think the global situation does here is highlights the fact that California has to import some of its supply and that makes it subject to the variability in global markets. And so, you know, what this does is instead of bringing in a fair amount of product over the water, they'll now be bringing in supply from Texas and from the eastern United States. The other thing it does is it serves the Phoenix market, which is also right now reliant on the California refining capacity. And as you know, that refining capacity has decreased as the number of refineries have shut. So I think it's a great solution, I think for California and for Arizona to be able to access domestic supply as opposed to having to be reliant on the international market. Okay, great, that's helpful.
Brandon Bigham
Thank you. And then maybe just turning to, you mentioned continued expectations for outperformance over the balance of the year. Is any of that tied to the dynamics created by the Iranian conflict and how do those change, if at all, when this conflict comes to, I'll say a firmer end or hopeful end?
Kim
Yeah, I'd say the Middle east conflict. Conflict has limited impact on us. Obviously in our CO2 segment on, you know, on unhedged barrels, which is about 10% of our barrels, we're getting a higher crude price, you know, on products, you know, where you might anticipate it impacting us is just higher product prices impacting demand. But we have not seen that today. In our terminal segment, I think your docks have been really busy. Our export docks have been very busy. And so record volumes across that. And so, you know, we do get a small amount of ancillary revenue resulting from those, those movements. But your tanks are sold on, on long term, what we call monthly warehousing charges, which are take or pay contracts. And then on natural gas, you know, not much in the short term. Obviously we're moving a lot to LNG exports, support facilities. But those are all under long term take or pay agreements. But as Rich said in his opening comments, you know, longer term it should drive incremental demand for us lng.
OPERATOR
Great, thanks so much. Thank you. Our next Caller is Manav Gupta with ubs. Your line is open, sir, good morning.
Manav Gupta
I wanted to ask you a little bit about the GCS expansion and at the same time the Trident pipe. And what I'm trying to understand is there's a lot of gas moving towards East Texas, including your GCH expansion and then egress from there to Port Arthur and Henry Hub might take a little more time, including your pipe Trident. And I'm trying to understand if that might lead to some dislocation in pricing as we understand between Houston ship channel KT or Agba Duche. How are you thinking about these localized gas markets as more gas from the Permian starts to pour in over there and the egress might take a little more time.
Kim
Okay, Manav, that was a, I think a two part question. So first, both projects are on track. They're moving forward, I think, you know, in terms of basis dislocation, et cetera. You know, I generally try and stay away from commenting on forward looking pricing, but I can tell you just on a fundamental level there are always going to be dislocations. Right as you look forward when you have demand coming on separately than the supply getting across and it goes in both directions. So what I would say there. Is that a possibility? Yes. I guess the reality is there's also a lot of demand from the power side that we're seeing coming up in Texas. You know, we're talking about the power growth within Texas. So speed to market is very important there. And maybe there's a home for that supply. I'll leave you with that. And then you can kind of draw your own conclusions from that commentary. And then the other thing I'd say just about our assets is we benefit a little bit on the margin from pricing dislocations in the short term. I mean obviously in the long term those drive expansion projects. But you know, most of our capacity on our pipes is sold under long term take or pay contracts.
Manav Gupta
So. Perfect. That power comment is very helpful. My quick follow up here is KMI somewhat unique. You have NATCAS storage opportunities which some of your competitors don't have. Can you talk a little bit about, you know, I think in December FERC approved a 10bcf expansion at NGPL's existing storage. And then I think at Beer Creek Storage also you had an open season. So can you talk a little bit about the NATCA storage opportunities in your portfolio?
Kim
Yeah, look very good question. And you know, as we see this demand coming on and the scale of this demand, one of the big differentiators and Rich alluded to, you know, there's midstream opportunities, but there's some differentiators. Storage is going to be a key differentiator for us. We, you know, we have those expansions on Slate that we're working on, especially the Bear Creek, not yet commercialized, but it's something we're working on. And we're looking at, across, looking at storage across our footprint, not only to be able to leverage these short term dislocations, but long term, as you think about operational balancing needs that these large demand centers are going to have, the ability to put in gas into storage and also pull out storage on a pretty quick basis is going to be critical for their operations. And that's somewhere where we think we differentiate ourselves quite nicely. Having over 700 BCF of storage in play and looking at much more to try and expand from an operating footprint standpoint. Thank you so much and congrats on a good quarter. Thank you.
OPERATOR
Thank you. Our next caller is Michael Bloom with Wells Fargo. Your line is open, sir.
Michael Bloom
Thanks. Good afternoon, everyone. I think I'm just going to ask all my questions at once, if that's okay. So first question really is on capital allocation. And it really encompasses both momentum, the steel and Western Gateway. And the crux of it is you have significant gas pipeline investment opportunities at six times investment multiples are better. So I think you addressed the strategic synergies at Momentum, but on Western Gateway, is it fair to assume that the return on this project will need to compete with your gas pipeline investments? And the second question is on Western Gateway specifically, can you clarify that if you lose any EBITDA from taking an existing pipe out of service for this project, it'll be captured in the overall project economics. Thanks.
Kim
Okay, sure. So I think your first question is just, you know, do we look at Western Gateway the same as we look at natural gas projects? And I would say no change in our capital allocation strategy. You know, we continue to target risk adjusted returns in the same range that we always have. And so, yes, this competes with natural gas. And so no change there in our approach. You ask about if we. Let me just say this, we're going to invest additional capital and we're going to get incremental ebitda and it will be at a, it will be at a nice return in order to do this project. Thank you, Mike.
OPERATOR
Just to clarify one thing, we're buying the Monument Pipeline, not Momentum.
Jean Ann Salisbury
Thank you. Our next caller is Jean Ann Salisbury with Bank of America. Your line is open. Hi, I Had a similar question to Manav's about the Trident staggered start dates. You know, as you mentioned, there's some concern that gas pipelines out of the Permian are going to come on well before gas pipelines to take them further east like Trident. So I guess my question is that if there's pull for more than the 30% of that gas on Trident in 2027, can you deliver that or is it really like that's the pace that you're bringing on Trident? Does that make sense?
Kim
Yeah, I mean Trident is going to come on, you know, first phase, first quarter 27. That's the schedule. And so, you know, there's no advance gas that can get across until we get that pipe up and running.
Jean Ann Salisbury
Oh, sorry, I meant like over the course of 2027. If there's more demand than just the 30% that you referenced in the news release. Demand for 100% of it, for example, is that something that you could deliver or it's more of a downstream constraint
Kim
Today there is some incremental capacity versus what we would move in 27. Yes.
Jean Ann Salisbury
Okay, that makes sense. And then I guess my other question was about the NGPL 550mm CFD expansion and the Panhandle. That seems like quite a lot of gas. And I was wondering if that's basically all demand pull for utility demand in that area or if it's partially people supply pushing out of the Permian and getting onto other pipelines after ngpl.
Kim
You're referring to the Amarillo expansion? Yes. So that is market pool driven by power. Great, thank you.
OPERATOR
Thank you. Our next caller is Keith Stanley with Wolf Research. Your line is open, sir.
Keith Stanley
Hi, good afternoon. Wanted to follow up on Western Gateway and just I guess how you're thinking about the project. So first just confirm you'd be contributing the whole SFPP pipeline to the JV. I think that's 350 million of EBITDA or so. And then on the returns, just how you're thinking about it. Do you look at it as just a return on the cash contribution you would make to the jv or do you also factor in that you're effectively upgrading the value of the asset with new long term contracts and a more competitive supply source?
Kim
Okay, so it's not the whole SFPP system. It is what we call the east line which goes from Amarillo to Phoenix and it's the west and the west line which now moves product from California to Phoenix. I mean, sorry, El Paso. I said Amarillo. El Paso to Phoenix on the east line. And so those are the lines that are getting contributed to the jv. There are additional SFPP assets in California that will not be, that will not be contributed. And then, you know, with respect, your second question, say that again about the ebitda, just the returns, like do you think of it just as cash on cash return on your contributions to the JV or you factor in the upgrading of the project? Well, so I mean the way we think about it is what cash are we contributing and what cash are we getting back versus anything we might be giving up? And so we look at it on an incremental return on our capital and it's based on an irr. So it's not just, you know, what is the year 1 cash on cash that we look at a full project irr. Got it.
Keith Stanley
Second question on the strong quarter, any color you can give on the impact that Permian Gas spreads are having on the business, is it, you know, single digit millions, tens of millions, hundred million? And then any impact on Winter Storm firm specifically that you would call out?
Kim
I mean, I'll say a couple of things. You know, the Waha Houston Ship Channel, you know, does have some modest benefit for us, but you know, our preference and practice for that matter, you know, as the than to sell, you know, transportation capacity, you know, to our customers on a long term basis. And so, you know, what I'd say generally about winter storms is, you know, what happens is you just have a peak in demand and therefore the services that we provide for our customers increase in value. And whether that's storage services or that's transportation services, you know, when you've got increases in band, you've got high volatility and you have a system that's running, you know, at the high utilizations that we talked about, that just creates opportunity for us. And so I think that's what you're seeing in the first quarter results.
OPERATOR
Thank you. Thank you. Our next caller is Olivia Foster with Goldman Sachs. Your line is open.
Olivia Foster
Hi, good afternoon team. Thanks for the time. I wanted to start on the gas transmission opportunity set going forward. When we think about the various projects under commercial discussion and the shadow backlog, I understand a bulk of the opportunities are related to growing power demand. Is there any way to frame up other details about the general size or scopes of these projects and potentially as well the geographies from which you're seeing the most demand? We saw several projects move forward today, but what are the next steps?
Kim
I can describe it generically. I don't think it's really going to answer your question for me to describe this generically and the reason that we don't give more detail around that is because most of these are competitive situations. And so we want to make sure that as we communicate before these projects are tied down, that we don't say something that causes us competitive harm. But in general, I mean, what's in the, you know, the project opportunity set beyond the backlog? You know, there's a lot of power and there's also a little bit of lng, there's some industrial, and it goes across the entire southern United States. So, you know, there's opportunities to, you know, going from Arizona all the way to Florida, I would add.
Rich Kinder (Executive Chairman)
It's critical to understand, as I'm sure you do, that our pipeline network relates very well geographically to where the big demand drivers are in this country. And so I think we are enormously advantaged by the sheer size and location of our pipelines.
Olivia Foster
That's very helpful. Color Appreciate the details. Maybe for my second question, I'd like to ask about the macro for a moment. Are you seeing any signs of volume changes on your system in response to higher commodity prices either from a GNP or potentially refined product perspective?
Kim
Thanks. Refined products in the quarter are down a little bit, but we don't think it is a function of higher prices. As I said earlier, we don't think that the higher prices are yet having a noticeable impact on the consumer, but that's something we'll continue to watch. And then with respect to, you know, GMP volumes, you know, most of our stuff is gas on the GMP side, you know, those volumes were up nicely in the quarter. They were up 15% in the quarter. And our Kinderhawk volumes in the Haynesville were up 34%. So nice there. Our crude gathering position is primarily in the Bakken and it's doing okay. Continental dropped rigs earlier this year, but prices are better. And so hopefully at some point some of our producers may increase rigs. But we have not seen that today.
OPERATOR
That's clear. Appreciate the time. Thank you. Our next caller is Jeremy Tonette with J.P. morgan. Your line is open, sir.
Jeremy Tonette
Hi, good afternoon. Hey Jeremy. Just wanted to come back I guess to the tracking more than 3% above budget and just wanted to refine that and see how much of that is kind of like one time in nature versus recurring. Like if we're thinking about for 27 go forward, should we think about how much of that 3% would kind of come back next year on a regular basis versus maybe being One time in nature? Well, I think, you know, with respect to the buyout on terminals, obviously that's, that's somewhat, one time in nature. And then, you know, with the, with the respect to the balance of it, I think, you know, that's just going to be a function of to some extent commodity prices because on the margin we do get some benefit from commodity prices and whether you have winters in the future, so to the extent that, you know, you're getting some good winter weather, systems going to remain tight for a while, we will, you know, our asset, the value that our assets provide, our customers will continue to be strong in those situations.
Kim
So it's fair to think of the, that bucket kind of, you know, the contract one time weather, how it shook out in commodity prices are kind of the main drivers there. Yeah, I mean I think volumes in CO2, you know, production volumes are up. That's nice. And you know, RNG did better. I think we already went through that. So products based business is very stable and doing well. So I think, you know, the base business is performing very well. And then you have this increased demand and increased volatility and increased commodity prices that around the margin are just driving tremendous outperformance. Got it. And actually just wanted to take a step back. We have not heard much conversation on carbon capture in some time now. And just wanted to see in the marketplace do you see any demand for that or is that kind of completely going away at this point? I would say it's mostly gone away at this point. You know, we look at, you know, we're looking at a few things, but I'd say it's mostly gone away at this point. But I'd say, you know, we have the expertise here and if the opportunity ever presents itself again and we can do it on an economic basis, then it's something that we'll look at. Got it. I'll leave it there. Thank you.
OPERATOR
Thank you. Our next caller is Elvira Scada with RBC Capital Markets. Your line is open. Hey, good afternoon everyone. Given where commodity prices are now, can you maybe review your oil hedging strategy and you know, just how you're planning to hedge out over the next year or so?
Elvira Scada
I mean, we're 90% hedged for the balance of this year and I think our, you know, $1 move in prices is a little less than 4 million bucks. I think it's like three and a half. And then next year we're like 70%, 75% hedge, 76% hedge for 20, 27 so, and I think that's roughly at 65ish. Yeah, 65 a barrel. And so our hedging strategy is, you know, remains the same in terms of, you know, I'd say the near term, you know, we try to hedge, you know, a large majority, you know, I'd say 80 plus percent of the current year. And we usually, by the time we get into the year, 90% hedge. And then with respect to year two, you know, we hedge that as more of that as we move closer to it. And so I think, you know, at this point in time, being 70%, 76% hedged on 20, 27 is consistent with how we've done it historically. You know, years three and out, we typically are waiting to lay on some more hedges because some of your cost structure is driven by commodity price. And so we want to make sure that we match those two things up. So very stable cash flow in the near term. Not huge amounts of commodity, not large amounts of commodity exposure. Some exposure on the margin, I think, is where we want to be.
Kim
And of course, to the extent that we outperform our plan, those percentages are based on plan volumes. And to the extent, as we said earlier, we are deriving having a very nice year as far as volumes, and we'll sell those into the open market, obviously. Great. Thank you. That was my only question. Thank you.
OPERATOR
Thank you. Our next caller is Jason Gableman with TD Cowan. Your line is open, sir.
Jason Gableman
Yeah, hey, thanks for taking my question. I wanted to first go back to Western Gateway and I guess two clarifying questions there. One, is it in your project backlog? I know it hasn't been to this point, but want to confirm it's still not in there. And two, as you think about the steps that you need to complete to FID the project, would you say those are less difficult than completing the open season, or do you still see a decent amount of risk of getting this project over the finish line?
Kim
Okay, with respect to the first question, no, it is not in our $10.1 billion backlog. We don't generally put any projects in there until they are approved fid, however you guys want to think about it. But. And then, you know, I'll let Mike address whether he. What he thinks is the. Is the hardest.
Mike Garthwaite
Yeah, I think entering into these as you go out with an open season, there's just a lot to understand in the market. And I think that was probably the harder piece we looked forward to executing and getting to fid. There's, of course, the regulatory aspects that we've got to look at, but we've got experience through all the states that we're operating in. We have experience with those regulators and have confidence in moving that forward.
Kim
Got it. Great. And my follow up is just on the commentary around future growth and kind of the more constructive outlook for gas demand in this country and talking about being kind of aggressive in your growth, in your, in your pursuit of additional growth. You know, thinking back to the, to the Permian pipeline going west that you didn't win. Were there any lessons learned in that process that you're going to apply in competing for future growth opportunities in this country, particularly as you, as you think about, you know, the competitive position of your asset base? You know, I think we approach that project the way we do all of our others. And so I don't think there was any specific lessons learned. Matt.
OPERATOR
Okay, great. I'll leave it there. Thanks. Thank you. Our next question is from Zach Van Everen with tph. Your line is open, sir.
Zach Van Everen
Hi all, thanks for taking my question. Maybe when thinking through natural gas demand in the Gulf Coast, I'm curious how much open capacity you guys have on NGPL southbound if you guys were able to source more gas to that pipe.
Kim
So look, I mean we are once again, you heard, we're operating at very high load factors. I mean, I think all the low hanging fruit is pretty much off the table. We're looking at some expandability, you see, you know, you see some reservations that go out there. You know, clearly we're working on an opportunity set that's pretty robust in both directions. As you think about the demand side, you think about power, you think about supply aggregation and you think about movement, you know, to get supply to kind of end use markets. I think, you know, the opportunity set there is pretty strong. But as far as specific capacity, you know, I mean we've got, there's so many pockets of capacity out there on the ebb, you know, it's out there, if there is any. But I would be surprised if there's any significant capacity in the key areas that you need it.
Zach Van Everen
Gotcha. That makes sense. And then on Kinderhawk, seems like volumes continue to perform well there. Have you brought on a portion of that expansion project and maybe the cadence for the rest of the year how you plan to bring that capacity on?
Kim
Yeah, look, so one, we're operating pretty much at our capabilities at capacity and you know, we're, you know, the volumes are there, we're still not, we still haven't brought on the expansion, but we plan on bringing it on, you know, as we layer it on through the balance of the year to add an incremental BCF of processing capacity. And we're, you know, we're on track to do so.
OPERATOR
Awesome. Appreciate the time. Thank you. And at this time, I am showing no further questions. Okay. Thank you all very much.
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