Last year was an outlier for Kinder Morgan (KMI 0.23%). The natural gas pipeline giant capitalized on opportunities to supply energy during Winter Storm Uri, enabling it to make a huge windfall profit in the first quarter. That's causing its 2022 results to look light in comparison.

Because of that, it's easy to miss that Kinder Morgan is having a fantastic year. The natural gas pipeline giant showcased that again in the third quarter by putting up strong results.

Drilling down into Kinder Morgan's results

During the third quarter, Kinder Morgan generated $1.122 billion of distributable cash flow (DCF), or $0.49 per share. DCF was 11% above last-year's level and 7% higher than its 2022 budget.

That pushed its total to $3.753 billion through the first nine months of this year. While that's down 14% from last-year's comparable period, DCF is up 15% after adjusting for the one-time impact of Winter Storm Uri.

The company delivered solid results across most of its business segments:

Kinder Morgan's earnings by segment in the third quarter of 2022 and 2021.

Data source: Kinder Morgan. Chart by author.

Kinder Morgan's core natural gas pipeline segment did most of the heavy lifting. Earnings were up 6%, compared to the prior year, fueled by higher transportation volumes, strong storage demand, and higher pricing on certain systems. The company noted that the war in Ukraine and its associated impact on the global energy market is driving strong demand for firm transportation and storage services and favorable contract-renewal rates.

This-quarter's other highlight was the carbon dioxide segment, where earnings soared 27%. Kinder Morgan benefited from higher crude oil, natural gas liquids, and carbon dioxide prices. The company also delivered stronger oil production across its fields, with output coming in 7% above its plan.

Finally, earnings in Kinder Morgan's terminals segment were up 3%. The primary driver was its bulk business, which is experiencing high coal volumes, due to surging energy prices.

The lone laggard was product pipelines, where earnings declined by 8%. That's due to lower commodity prices that impacted inventory values and lower volumes for most of the products it transports and stores.

A look at what's ahead for Kinder Morgan

The company's strong showing in the third quarter has it on track to end 2022 above its initial budget. The pipeline giant now expects DCF to come in about 4% to 5% above its $4.7 billion budget, putting it at roughly $4.9 billion for the full year.

Kinder Morgan also expects capital spending to be about $500 million above its budget of $1.3 billion. The company has recently made two acquisitions to expand its renewable natural gas platform. It also found attractive investment opportunities in its natural gas pipeline and carbon dioxide segments.

The company can easily afford that additional investment. Even after increasing its already attractive dividend by 3% earlier this year, Kinder Morgan expected to produce $750 million of excess cash after funding capital projects and the shareholder payout. With DCF on track to exceed its budget by 4% to 5%, Kinder Morgan will still produce over $450 million of excess cash this year after funding its additional investments. That has allowed it to repurchase about $367.5 million in stock this year.

Meanwhile, Kinder Morgan recently created additional financial flexibility by selling a 25.5% stake in its Elba liquefied natural gas (LNG) facility for $565 million. That's enabling it to maintain a strong balance sheet. It expects to end this year with a 4.3 times leverage ratio, below its long-term target of 4.5 times. Because of that, Kinder Morgan has ample financial flexibility to make new investments as compelling opportunities arise.

Strength amid the storm

Kinder Morgan is benefiting from improving conditions in the energy market. That has it on track to make more money than it initially expected. It also secured several new investments and cashed in on its LNG investment.

These factors helped drive its stock price up by double digits this year. Add in its over 6%-yielding dividend, and Kinder Morgan's total return is in the mid-teens, which has significantly outperformed the more than 20% decline in the stock market.

That has made it a haven for investors during this-year's stormy market conditions. Meanwhile, its new investments and big-time dividend could give Kinder Morgan the fuel to continue producing attractive total returns in the coming years.