Kinder Morgan’s (KMI) Texas Intrastate business is set up for a near-term boost, but East Daley believes the market underappreciates how quickly that tailwind can fade once new Permian Basin pipelines start to clear the egress bottleneck.
A blowout in the Waha-to-Houston Ship Channel spread in 1Q and 2Q26 should benefit KMI’s Texas and Tejas systems. The pipelines provide the company significant scale: KM Texas and Tejas together comprise 6,125 miles of pipe, 9.3 Bcf/d of design capacity and 146 Bcf of storage. KMI flagged higher contributions from its Texas Intrastate segment in 4Q25, and the Tejas South-to-North expansion added another 781 MMcf/d of capacity into the Houston market in 2025.
The dynamic supports East Daley Analytics’ near-term setup for an earnings beat. In our Financial Blueprint model, KMI surpasses Street consensus in 1Q26 and handily beats in 2Q26 as wide spreads to the Permian lift marketing and intrastate earnings. We forecast 2Q26 EBDA of $2.30B vs Street expectations at $2.05B, a 12.1% beat (see the KMI asset breakdown for the Texas Intrastate segment from Energy Data Studio).
The near-term beat is entirely driven by differentials from the Waha hub to downstream delivery points in Texas. Waha spot prices have traded below zero since early February, reaching a low of -$7.86/MMBtu on March 12 as gas pipelines run full out of the Permian. We see no cause for relief in 2Q26 as a combination of higher oil prices, seasonal pipeline maintenance, and lower springtime demand should keep Permian gas prices under severe pressure.
The longer-term dynamic is more challenging for Kinder Morgan. The company’s own project slate shows why: Gulf Coast Express (GCX) will add 570 MMcf/d of capacity in 2Q26, and the startup of Trident Pipeline adds 2.0 Bcf/d from Katy to Port Arthur beginning in 1Q27. KMI also highlights a longer-duration, more contracted Texas intrastate book; its average remaining contract life rises to 7.3 years, while roughly 96% of corporate cash flows come from take-or-pay, fee-based or hedged sources. Those factors mean margins should normalize over time.
Along with the GCX expansion, several major greenfield pipeline projects will enter service from the Permian over the next several years, starting in 4Q26 with the 2.5 Bcf/d Blackcomb Pipeline and Phase I of the Hugh Brinson project. Permian gas prices should rebound sharply as more egress opens, narrowing regional differentials and cutting into marketing profits.
Most analysts base their KMI EBDA forecast on the forward curve, and in East Daley’s view the curve is not capturing the full downside as basis normalizes. We expect the spread from Waha to the Houston Ship Channel to settle closer to $0.35/MMBtu, not the ~$0.88 currently implied by futures. So while KMI, along with names like Kinetik (KNTK), Energy Transfer (ET), Enterprise (EPD) and Targa Resources (TRGP) gain from short-term basis dislocation, they face long-term headwinds as more Permian pipelines enter service and the arbitrage window vanishes. That is why East Daley is bullish on 2026 and bearish 2027. – Jaxson Fryer Tickers: EPD, ET, KMI, KNTK, TRGP.
Download Part II of East Daley’s Permian Basin White Paper Series
The Permian Basin’s next big buildout is already taking shape, but this time the driver isn’t crude oil. In The Permian Basin at a Crossroads: Why This Pipeline Boom is Different, East Daley Analytics’ latest white paper reveals how gas demand from AI data centers, utilities and LNG exports is rewriting the midstream playbook in the leading US basin. Over 10 Bcf/d of new capacity and $12 billion in investments are reshaping flows, turning the Permian into a gas powerhouse even as rigs decline. Read Part II: Why This Pipeline Boom is Different
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