Just four short years ago, things weren't looking so hot for the largest natural gas pipeline operator in North America, Kinder Morgan (KMI 0.15%). The company had announced a 75% dividend cut to help with its high debt load, and the share price dropped like a stone. 

However, since then, Kinder Morgan has been pulling itself together. Can it keep it up? Here's where the company is likely to find itself five years from now. 

Pipes head toward a refinery in the distance

Kinder Morgan, the largest gas pipeline company in the U.S., has been punished by the stock market. Image source: Getty Images.

Slow but steady improvement

Kinder Morgan's fortunes cratered during the energy price slump of 2014-2017. By 2016, the company's revenue on a trailing 12-month basis fell almost 20% to just over $13 billion. Net income dropped off a proverbial cliff, falling 85.6% between Q3 2014 and Q3 2016. Long-term debt levels soared 28.5% from about $35 billion to more than $45 billion. And with the company's painful dividend cut, investors fled the stock, shares of which collapsed 65%, from more than $40 per share to $13 per share. 

Since then, however, the company's fundamentals have improved slowly but steadily. Revenue is up 8.4% from its 2016 low. Free cash flow is up 259% from its 2015 low. And management has used some of that cash to pay down long-term debt by 22% and double the dividend payout. 

But more important than the improving fundamentals are the improving industry conditions driving them. 

More gas than producers know what to do with

Since the oil price slump began in 2014, domestic oil and gas production has exploded, thanks to the comparatively inexpensive shale drilling available in the Permian Basin and other U.S. hydrocarbon hot spots. The U.S. Energy Information Administration reports that U.S. natural gas production has increased by 8.3% since 2014, and estimates it will jump an additional 10.9% by 2020. 

All that gas has to go somewhere, and Kinder Morgan has been expanding its pipeline network to accommodate it. The company currently has about $6.1 billion of expansion projects under construction, and expects to greenlight an additional $2 billion to $3 billion annually moving forward. These projects include two major gas pipelines from the Permian Basin: the Gulf Coast Express, which is slated to begin operation this October, and the Permian Highway Pipeline, which will enter service in October 2020. Management admitted on the most recent earnings call that it's even considering a third pipeline as well. 

Some of these new projects push the envelope a bit. Kinder's traditional focus has been on natural gas pipelines, but the company is pursuing a joint venture with Tallgrass Energy (TGE) to develop an oil pipeline through the Rockies. The JV would primarily consist of Tallgrass' existing Pony Express oil pipeline system and Kinder's Cheyenne Plains Gas Pipeline, which would be converted to handle oil.

Looking long term

Kinder Morgan plans to keep growing its gas pipeline network and to expand into the oil pipeline business through its JV with Tallgrass. But it's worth pointing out that pipelines aren't built in a day. We're looking at where the business will be five years from now, but some of the projects currently in Kinder Morgan's $6.1 billion program may not even be finished by then.

That's not stopping the company from looking ahead to 2024. Indeed, on the most recent earnings call, president Kim Dang had this to say about where the company might be in five years: "Overall, the higher utilization on our systems ... will drive nice expansion opportunity. If you look at the longer term, by 2024 the natural gas market is projected to grow to almost 110 [billion cubic feet] a day, driven by increases in power generation, LNG and Mexico exports, and continued industrial development, with most of that supply growth expected to come out of the Permian, the Haynesville [Shale of Texas/Louisiana], and the Marcellus [Shale of Pennsylvania/West Virginia/Ohio]."

Is anyone surprised that Kinder Morgan has significant pipeline assets in all three of these named formations that are expected to drive supply growth?

Keep an eye on Kinder Morgan

The U.S. energy boom seems to be here to stay, and Kinder Morgan is poised to ride the wave of higher domestic production. With a steady stream of new projects in the pipeline (no pun intended), the company looks set for sustained growth over the next five years. 

Investors should expect that growth to power additional dividend increases and debt reduction, which makes the company even more attractive as a long-term investment.