Kinder Morgan (NYSE:KMI) is bullish on the future of natural gas in America. The company sees good reason for its optimism as its MLP Kinder Morgan Energy Partners (NYSE:KMP) continues to see its backlog of new projects balloon as customers sign up for additional capacity. In addition to that, the company sees anecdotal evidence continuing to pile up suggesting that gas is the place to be these days. One piece of evidence came from a recent study that said companies like Kinder Morgan will need to invest $114 billion to build natural gas infrastructure by 2020. Needless to say, Kinder Morgan's growth isn't likely to slow anytime soon.
The ballooning backlog
The Kinder Morgan companies currently have a contracted project backlog totaling $17 billion. In the past quarter alone, Kinder Morgan added a total of $1.3 billion in new projects to its backlog. However, even after backing out the $700 million in projects it completed in the past quarter, the company still added a net $600 million to the backlog.
The bulk of the new projects added to the backlog came from Kinder Morgan Energy Partners' natural gas pipeline business. Since the beginning of December the company's natural gas pipeline segment has seen customers commit to transporting 3.5 billion cubic feet of natural gas per day.
However, the company has another 1.7 Bcf per day of pending transactions relating to LNG exports along with another 300 million cubic feet per day of other pending commitments. In total, this represents 5.3 Bcf of new natural gas capacity requests since the beginning of December. That represents more than 7% of America's current natural gas demand.
The growing non-backlog backlog
These potential projects are fueling what some are calling the company's non-backlog backlog. Currently, Kinder Morgan sees upwards of $18 billion in future projects that are not currently counted in its current backlog. That's just in the natural gas pipelines segment and it's up from the $15 billion the company reported at its last board meeting. However, that potential backlog could be getting even bigger.
This past quarter CEO Richard Kinder pointed out two additional pieces of anecdotal evidence that surfaced in the past few weeks that gives him reason for continued optimism on the future of natural gas in America. He noted that the Energy Information Agency now sees natural gas production from the Marcellus Shale hitting 15.5 Bcf per day in August. By the following month, production from that prolific shale play will surpass the output of Qatar. That's a ridiculous amount of gas, as Qatar is currently the third largest producer of natural gas in the world.
Kinder also pointed out that the explosion in natural gas production in America points to the need for infrastructure to be built to transport all of this gas. According to the Inga Foundation, America needs to spend $114 billion on gas infrastructure between now and 2020. Given that Kinder Morgan Energy Partners' main business is building and operating natural gas pipelines, this suggests that the company's growth won't run out of gas anytime soon.
Kinder Morgan and Kinder Morgan Energy Partners have a massive backlog of contracted growth projects that will keep the company busy over the next few years. However, the company's potential backlog continues to grow which should result in firm commitments and a growing contracted backlog. Further, there's plenty of growth potential still in the pipeline as upwards of $114 billion will need to be spent on natural gas infrastructure through the end of the decade. Given that Kinder Morgan's strength is in natural gas pipelines, there is a great likelihood that it will be the company making a lot of those investments.
Matt DiLallo has the following options: short January 2016 $32.5 puts on Kinder Morgan and long January 2016 $32.5 calls on Kinder Morgan. The Motley Fool recommends Kinder Morgan. The Motley Fool owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.