Welcome to Kinder Morgan's Second Quarter 2026 Earnings Results Conference Call. Today's conference is being recorded.

I will now turn the call over to Mr. Rich Kinder, Executive Chairman of Kinder Morgan.

Thank you, Ted. Before we begin, as we usually do, 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 my remarks for this investor call could really be summed up in four sentences.

First, the second quarter was another strong quarter for KMI as both our EBITDA and EPS continue to exceed both prior year and our own budget for 2026 by significant margins. Second, the natural gas growth story remains very positive as demand for LNG export volumes and gas for electric generation continues to grow.

Third, this growth is leading to numerous additional opportunities to build new midstream infrastructure supported by long-term contracts with creditworthy customers, and we expect to FID very substantial additional CapEx projects during the remainder of this year. Finally and very importantly, we can fund these projects almost completely with our internally generated cash flow while still continuing to pay a solid and growing dividend and maintaining a debt-to-EBITDA ratio at the lower end of our targeted range.

Now for some of you, those four sentences may not make a compelling case for investing in Kinder Morgan, not an exciting enough story. But I will remind you that this unexcited company has, over the last 29 years of its existence, grown its enterprise value at a compound annual rate of approximately 22% while also paying out over $40 billion in dividends.

Now just maybe, that gives us what we say a little bit of credibility. And with that, I'll turn it over to Kim and the team.

All right. Thank you, Rich.

We're extremely pleased with our second quarter results. Another fantastic quarter for Kinder Morgan, big one that reflects both the strength of our underlying business and the outstanding execution of our employees across the company.

We significantly outperformed both last year and our budget expectations. Adjusted EBITDA increased 12% compared to the second quarter of '25, while adjusted earnings per share increased 32%.

Importantly, growth was broad-based, with every one of our business segments contributing positively to the quarter's strong performance. Given our results through the first half of the year and our confidence in the outlook for the remainder of 2026, we are increasing our guidance.

We now expect full year adjusted EBITDA to be at least 5% above our '26 budget and adjusted EPS to be at least 12% above our original budget. Turning to growth capital.

Our backlog remains one of the strongest in our history. During the quarter, our backlog decreased from approximately $10.1 billion to $9.6 billion.

This decline was primarily the result of successfully placing more than $650 million of projects into service, partially offset by the approximately $200 million of new project additions. While our sanctioned backlog was down modestly this quarter, today, the Board contingently approved almost $400 million of projects, which are in advanced contract negotiations and will be added to the backlog upon contract execution, virtually offsetting this quarter's decline.

In addition, we anticipate, as Rich said, adding significant projects from our over $10 billion opportunity set before year-end, likely more than offsetting the approximately $1 billion of projects we expect to place into service during the second half of 2026. Our 3 largest natural gas expansion projects that are underway continues to make excellent progress.

Mississippi Crossing, South System Expansion 4 and Trident are each progressing on schedule and on budget. These projects represent critical infrastructure supporting increasing electric power generation, growing LNG exports and broader natural gas demand across North America.

For Mississippi Crossing and South System 4, we received our final FERC environmental impact statement in June and expect to receive our FERC certificate by the end of this month, an important milestone as both projects move towards construction. Trident continues to advance well and is now approximately 60% complete.

Financially, we remain in an exceptionally strong position. Our balance sheet ended the quarter at approximately 3.6x leverage, providing significant flexibility to fund attractive growth opportunities while continuing to maintain our disciplined capital allocation framework.

Finally, I'd like to spend a moment on the broader market backdrop. The fundamentals supporting our Natural Gas business have never been stronger.

According to Wood Mackenzie's most recent outlook, U.S. natural gas demand is expected to exceed 160 billion cubic feet per day by 2035.

That represents approximately 46 billion cubic feet per day of incremental demand growth compared to 2025. The primary drivers continue to be increased LNG export capacity and rapidly growing power demand.

The scale of this projected demand growth underscores the critical need for the infrastructure we own and the projects we are developing. With one of the largest natural gas transmission systems in North America, a premier portfolio of expansion opportunities, a strong balance sheet and a highly experienced management team, we believe Kinder Morgan is exceptionally well positioned to continue delivering value for our customers and shareholders for many years to come.

And with that, I'll turn it over to Dax.

Thanks, Kim. Starting with the Natural Gas business unit.

Transport volumes were up 7% in the quarter versus the second quarter of 2025. There were multiple drivers for the incremental demand, including increased LNG feed gas deliveries on the Tennessee Gas Pipeline, incremental demand on our intrastate system, incremental power demand along our El Paso pipeline and greater exports to Mexico.

Natural gas gathering volumes were up 26% in the quarter from the second quarter of 2025 and increased across most of our gathering and processing assets, with the largest impact coming from our KinderHawk system in the Haynesville, which was up 54%. As we have continued to say, demand for gas on our pipes remains high, and our system remains highly utilized.

Looking forward and consistent with Kim's comments on our shadow backlog, we continue to see significant incremental project opportunities across our natural gas pipeline network. For example, we are in various stages of development on projects to serve more than 10 Bcf a day of natural gas demand in the power generation sector and approximately 3 Bcf a day in the LNG sector.

In our Products Pipelines segment, refined product volumes were down 5% in the quarter compared to the second quarter of 2025, and crude and condensate volumes were down 16% in the quarter compared to the first quarter of '25, with most of the decline in crude volumes explained by the removal of Double H from service for the NGL conversion early in the third quarter of 2025. Excluding Double H volumes in both periods, crude condensate volumes were down about 5% in the quarter compared to the second quarter of 2025.

Regarding Western Gateway, KMI and Phillips 66 are steadily moving the project forward. While progress on our partnership agreements has been significant, the process has taken longer than initially anticipated, primarily due to the complexity of the proposed arrangement.

Our aim is to complete the documents within the next month or 2, at which point, assuming satisfactory progress continues, we would plan to FID the overall project. In our Terminals business segment, our liquids lease capacity remains high at 93%.

Market conditions continue to remain supportive of strong rates, and the utilization of tanks available for use is approximately 99% at our key hubs on the Houston Ship Channel and at Carteret. While the temporary Jones Act waiver has added some market uncertainty, our 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 almost 3 years and over 3 years when considering options that are likely exercised.

The CO2 segment saw 10% higher net oil production volumes compared to Q2 of 2025, which was led by a 15% increase in production at SACROC. NGL volumes were 9% higher, and CO2 volumes were 5% higher.

Finally, RNG volumes increased 8% as the significantly improved operations that are driving both greater uptime and hydrocarbon recovery at our facilities continued in the second quarter. And with that, I'll turn it over to David.

Thank you, Dax. We're declaring a quarterly dividend of $0.2975 per share, which is $1.19 annualized and an increase of 2% over 2025.

As you've heard, we delivered record-setting -- we had a record-setting quarter, with both net income attributable to KMI and adjusted EBITDA reaching record levels for the second quarter. That performance was also meaningfully ahead of our internal expectations, with EPS more than 24% above our budget and adjusted EBITDA more than 9% above our budget.

This follows a first quarter where we achieved similar outperformance, so we've completed a first half of 2026 that was extremely strong. For the second quarter, we generated net income attributable to KMI of $867 million and EPS of $0.39.

These are 21% and 22% above the second quarter of 2025, respectively. Adjusted EPS was $0.37, a 32% increase from last year, and adjusted EBITDA grew 12% from last year.

These are very strong results. And as Kim mentioned, it was very impressive that each one of our business units contributed to the year-over-year growth.

The Natural Gas business saw higher volumes and favorable margins across the Texas intrastate network. We also had greater gathering and processing volumes as well as increased contributions from park and loan services, growth project contributions, capacity sales and utilization increases across multiple assets.

The Products business benefited from improved commodity pricing as well as greater butane blending volumes and rates, partially offset by lower refined product volumes. Our CO2 segment saw greater contributions from commodity prices, as well as very nice volume growth, as Dax mentioned, especially at SACROC, which was up 15% from last year.

In Terminals, we had increased volumes and rates in our liquids business as well as favorable commodity pricing. Those were partially offset by some favorable onetime items that we experienced in 2025.

The year-to-date versus 2025, EBITDA has grown 15% and adjusted EPS has grown by 35%, very impressive growth. So for the full year 2026, as Kim mentioned, but it's worth repeating, we expect to be more than 5% favorable to our budget on adjusted EBITDA and more than 12% favorable on adjusted EPS.

That represents more than $430 million of additional EBITDA contribution. We think this is a clear demonstration of the enhanced value of energy infrastructure in the U.S., particularly as we suspect we will continue to see growing demand for natural gas across the country.

Moving on to the balance sheet. Our net debt to adjusted EBITDA ratio ended the quarter at 3.6x, which is down from 3.8x at the beginning of the year and is down from what we budgeted.

And now we expect to end the year at 3.6x leverage as well, and that's down from the budget of 3.8x despite spending more on our Monument acquisition and increasing our growth capital relative to what we had budgeted. And that's all driven by our EBITDA outperformance.

This also puts us well below the midpoint of our target leverage range of 4.0x. Year-to-date, our net debt increased $311 million.

And I'll walk through a high-level reconciliation of how we get to that increase. We generated $3.45 billion of cash flow from operations.

We've paid out $1.315 billion in dividends. We've spent $1.92 billion in total capital, which includes growth capital, sustaining capital and our contributions to JVs.

And with the Monument acquisition of $500 million, it gets you pretty close to the increase in net debt for the year. And I'll turn it back to Kim for Q&A.

Okay. Thanks, David.

Ted, if you'll come on, we will take questions.

The first question in the queue is from Praneeth Satish with Wells Fargo.

I wanted to start with a high-level question. So you've talked roughly about spending about $3 billion per year of growth CapEx, which you mentioned kind of keeps you around free cash flow breakeven.

But I guess when I look at the size of the data center opportunities, power-related opportunities across your footprint, I'm wondering if that's the right target anymore? Is there a scenario here where the backlog becomes large enough maybe with SSE5 or something along those lines where you significantly outspend free cash flow and move to a more leverage-neutral approach?

On our math, I mean, you can spend up to $6 billion per year of growth CapEx and keep leverage unchanged. So I guess I'm just wondering if there's enough demand in the potential backlog to get to those levels?

And then also, would that level of CapEx spend fit within your guardrails?

Let me say a couple of things on -- the over $3 billion in expansion CapEx per year that we projected is based on the current backlog, so the roughly $10 billion. And as I think Rich alluded to and I said is we do expect that we will be adding significantly to that backlog.

With the current backlog, what happens to our debt-to-EBITDA is it comes down over time as we add incremental EBITDA and the debt balance essentially stays flat. So right now, we're at 3.6x, [ pending ] the roughly $3 billion per year debt-to-EBITDA comes down.

At 3.6x, if we needed to take that up to fund incremental CapEx in excess of our cash flow, if we wanted to go to 4x, we have $850 million of capacity for every 0.1x. So if we wanted to go up to 4x, for example, that's $3.4 billion of incremental balance sheet capacity.

So we absolutely have the ability to finance incremental cash flow -- I mean, incremental CapEx, stay within our -- at the middle potentially of our balance sheet target range. And look, I think we expect that we will be adding projects to the backlog.

And that's -- a lot of that's really around power is the primary driver of those incremental expansion projects.

Got it. That's clear.

And then maybe shifting gears. So on TGP, it looks like there was a nonbinding open season, Project 219 South.

Can you talk about how you're thinking about the competitive landscape here for building a takeaway project out of the Northeast down to the Southern markets? I guess, what drove the project size and the scope of it versus potentially pursuing something larger?

And then, is this fundamentally a brownfield expansion or more greenfield? And then how do you think about kind of execution and permitting?

Praneeth, this is Sital. So just -- as you just take a step back and the way we look at this corridor, what drove the open season is we're seeing not only the demand in the Southeast and the South, but we're also seeing demand through the 4-state corridor, Tennessee, Ohio, West Virginia and Kentucky, where we're starting to see a power corridor form.

And so given the interest that we've been seeing out there, our thought was to put out -- we know we have somewhat of a brownfield opportunity with the smaller case. We are evaluating a larger case.

But I think what we're -- our objective here, we typically go out with open season with anchor shippers in hand, but the market here is still evolving. And so our thought initially was to put the project out of a smaller size.

And if the market indicates the need for a bigger one, we can evaluate it. We have the ability to morph this into something bigger if needed.

The next question in the queue is from Jeremy Tonet with JPMorgan.

Just wanted to pivot towards Permian Link, if I could. And I was just wondering if you could walk through a bit, what you see the competitive advantages of that project?

And when do you think you might be in a position to take FID?

Okay. Well, I'll answer the second one first.

Our modus is we have a contract, and we go to FID. We are in discussions with customers.

As you know, we had an open season, significant interest in the project. I think what differentiates this project is our -- when you look at the NGPL footprint, we basically have a little power corridor forming across the pipeline.

But the real differentiator here is the link to storage, and hence, the name Permian Link. And I think as you see these power opportunities via data centers and organic power growth develop, that 765 kV line is -- ERCOT's approved that, and that's going through there.

So you're starting to see a lot of activity. And that's the foundation for kind of the path that we've picked.

Where we are today is we're discussing with our customers in the open season. And as you know, there's lots of interest out of the Permian to get additional egress projects.

We will sanction the project if we have contracts that support it with the returns that are acceptable.

I was just wondering, timeline, any thoughts you might be able to share there as well?

Well, I think we've got this thing targeted for a 2030 type in service, right? I mean, just by the nature of the long leads.

I mean, obviously, the sooner we get the contract signed, the faster we can go and start getting those long leads ordered. It's still competitive, but I would -- the discussions are going well.

That's helpful. And just one more, if I could.

If I think about Permian Link, if I think about TGP, Station 219 South, these projects, depending on how they come together, could be fairly sizable in nature, things that are more in the $1 billion range as opposed to even a $400 million range. And I was just curious, as you look at your project portfolio, what you see as possible out there.

Do you see many other projects in that size, that chunky size? Are there smaller projects?

Just wondering, if you think about these larger projects, do you see more than just like a couple out there?

Yes. I mean, I think there are -- I mean, it's like our existing backlog.

There are a handful -- our opportunity set has a handful of the $1 billion-plus and then a lot of $100 million to $500 million projects. So it's somewhere in terms of size and scope and number of projects.

The next question in the queue is from Julien Dumoulin-Smith from Jefferies.

Maybe just to pivot from the last two questions here. So on the approval for the almost $400 million of projects not yet in backlog, can you give color on those or what needs to happen for those to move into backlog?

And then to really square it up, how do you think about the timeline for some of that shadow backlog to convert into FIDs? Is that still kind of a 2026 timeline when you think about these larger, lumpier projects?

Yes. In terms of the $400 million, so on those, we've got the project design, we've got the cost.

We have agreed on commercial terms with the customers, and we are a long way through agreeing on a contract. And so it's weeks to a month or something probably before you get contract signatures on those.

So I think those are at the -- on the lip of the cup. And then your second question was with respect to converting the shadow backlog.

And I think it's hard to predict exactly when projects are going to be FID-ed. But as we have all said on this call, I think, one, there is a lot of opportunity.

We are not seeing a slowdown in the opportunity set. If anything, we're seeing increases.

And second, I think we expect to add significant projects in the back half of this year.

Got it. Excellent.

So this year, indeed. And then just specifically, if you can comment a little bit on NGPL here in as much as, obviously, you've got very regional dynamics there working in your favor as a tailwind.

Can you talk about where specifically you might see incremental demand and the potential scale and timing on that front?

Yes. So just when you look at the NGPL footprint, you've got the Permian Link corridor, if I will, that 765 kV line, there's a lot of activity there.

We've got activity in the market area up in the North. There's a convergence of inquiries coming in.

And so you've seen some capacity reservations where we are trying to target that demand up in the Northern half of the -- Northern section of NGPL. Once again, these are all fluid.

Once again, highly competitive. But we're -- our goal is to try and get these [ knock done ] as fast as we can.

Next question is from Manav Gupta with UBS.

A quick question first on the Western Gateway. Even with a minor delay, it looks like both parties are very strongly interested in the project.

Clearly, California has massively short product, and clearly, their strategy of trying to import only from Korea or other places has gone wrong. So where are we with this project FID process?

And how confident are you that you will get to FID probably within the next 2 or 3 months?

Yes, Dax?

Yes. This is Dax.

As I mentioned in my comments, I think we've progressed the documents along pretty far. We've made a lot of progress, and we would expect, based on what we see right now, to FID the project in the next month or 2.

My second quick follow-up here is you have a big footprint in Haynesville, and we are seeing an incremental demand from Haynesville given the demand for natural gas. Do you think Haynesville would be a core basin to meet the growing demand for natural gas?

And can you remind us of your footprint in the Haynesville?

Yes. We've got a very significant footprint in the Haynesville.

And if you look -- I mean, whether you look at our numbers or Wood Mac's numbers, I think we're expecting significant growth coming out of the Haynesville between 2025 and 2030. So on our number -- well, on Wood Mac's numbers, it's like 7 Bcf a day.

And on our numbers, it's 10 Bcf a day. And this quarter, we're seeing sort of the start of that.

Our volumes in the Haynesville were up, as Dax said, over 50%. This quarter, I think we averaged 1.9 Bcf a day for the quarter, and volumes got to around 2 Bcf during the quarter and so over 2 Bcf during the quarter.

So we're just in the process of completing a $500 million investment to bring on incremental transport and treating capacity, and that project is on time and on budget.

Yes. And Manav, I'll just remind you, that's another Bcf of processing capacity, and we just hit a peak here in June in the Haynesville.

The next question is from Theresa Chen with Barclays.

On the Project 219, the return in terms of the competitive dynamics, would you be able to elaborate on what advantages your project brings versus other contenders along similar corridors, including Boardwalk's proposed Borealis Project nearby?

Well, look, I'll talk about Tennessee and the benefits of Tennessee. I mean, ultimately, each -- I'm not going to talk about Borealis, but I mean, Tennessee is -- what we view as an advantage for Tennessee is it's in our existing corridor.

We've got 4 pipes going through that corridor. There's a developing market through that same corridor, and we have some capabilities using some of our existing footprint to help facilitate.

I think that's -- I would call advantage #1 for the base smaller project. In terms of access to supply, we can reach back all the way to the 219 Mercer, Pennsylvania area, which has additional supply points from the Southwest Marcellus.

You've got some of the traditional supply. When you think about the Clarington opportunity, we can even look to link to access to Clarington area along the way.

So supply diversity is there, the south of the Utica. I think when you look at that diversity, I think that's an advantage.

And then you have market advantage in terms of all the access that you get along the way in that developing corridor, plus we can get the volumes all the way to our Mississippi Crossing project, and then ultimately into the Southeast. That's kind of the design and the nature of the base plan.

So I think that's it in a nutshell, diversity.

Understood. And sticking to the same region in the Southeast, following the Southern Company's recently announced agreement with OpenAI for a data center project in Effingham highlighting the growing gas demand associated with AI infrastructure in general in that region, how do you view the opportunity set for the SNG system?

Could this drive future expansion projects or incremental gas to power opportunities for the Kinder-Southern JV over time?

Yes. Let me say a couple of things, and then I'm going to pass it to Sital.

But there is a clear need for additional expansion in this region. I mean, Georgia Power earlier this year filed their Large Load Economic Development Report, which showed over 75 gigawatts of potential power demand between now and the mid-2030s.

And that is 1 utility in 1 state. And so projects will be competitive.

I'll let Sital comment a couple of this. But our asset position in the Southeast market, I think, is -- puts us in a great spot between SNG, MSX that we're developing, Bridge that we're developing, our 50% interest in FGT.

So it is an exciting market.

Yes. And so Theresa, we're -- obviously, we're evaluating projects to serve the entire Southeast, right?

And we're trying to see what we can do. It's highly competitive.

So we're obviously very cognizant of that fact, but we feel good about the opportunity set, and we're trying to get some of these across the finish line. I would say, in terms of the Southeast in particular, it's not just the SNG footprint.

We got EEC, we've got other assets in the basin that can help solve some of these long-term needs. And so the teams are working hard to try and get these across the finish line.

Next question is from Jean Ann Salisbury with Bank of America.

Now that Double H has ramped an NGL service, what are your latest thoughts on the potential to add volumes to that system, and what would that take?

So the potential to add volumes in terms of the capacity, we -- like I said, when we had the last call, we have capability to bring incremental molecules down. We're in a pretty competitive market here.

And so until we get another contract, I'm not going to comment on that, but we have capabilities to further expand. And then I think that's -- that will involve some collaboration with other parties.

And because it's so competitive, we're just going to stop there.

All right. Fair enough.

And then as more turbines are shifting into power generation, are you seeing any constraints on getting compression for future pipeline projects? And how are you mitigating that risk, if so?

So one, we're starting to see -- we are starting to see pressures on some of the timelines. Obviously, we have relationships with some of these providers, and we're doing it to make sure we stay ahead of it.

Our team is focused on the opportunity sets that we see in front of us, and we're trying to manage that. We're trying to factor that into our project economics as we're starting to bring these projects across.

And the team is just trying to do -- they're doing an incredible job staying on top of all the variabilities. So I think the way -- when we see this developing, we're just trying to stay ahead of the impending, I guess, delay in supply chain that may develop over time.

And I'd say it hasn't lengthened out that much recently. This has been an ongoing phenomenon.

And so we've been on top of this since we started doing MSX and South System 4. So it's something that over the last 2 years, we've gotten very good at taking into account and dealing with.

The next question is from Spiro Dounis with Citi.

I want to go back to the backlog quickly and really just go back to your comments on how you're thinking about it into year-end. As you mentioned, you'got several large-scale projects in development.

Many of them have come up on this call already to kind of offset that $1 billion or I'd say, more than offset that $1 billion coming into service. So I guess I'm just curious, are all these projects you sort of talked about or could we be surprised by what you end up announcing later this year?

And as you think about the complexion of the projects, are these primarily gas-related, maybe with the exception of Western Gateway, which I assume is included in that $1 billion figure?

The answer is yes. Other than Western Gateway, they are primarily gas-related.

And what I would say with respect to what projects they could be, I think -- everybody knows the themes is what I would say, where the demand is growing in the areas that need pipeline capacity. And so I don't think you will be surprised by the underlying drivers of the demand.

Got it. That's good color.

And then just going to the balance sheet, maybe for you, David, but just now at 3.6x, $3.4 billion of capacity from here. You talked about the organic growth potential which might end up consuming a lot of that capacity.

But just curious to check in here on the M&A side and see where that fits in, how you see that landscape today? And if this maybe opens up room to do something larger in scale?

All right. So on the M&A side, as we announced an M&A deal last quarter that we have now closed, $500 million.

And that's consistent with -- we've been seeing opportunities of about that size over the last couple of years and have been able to roll them in without an issue because those come with cash flow, and you don't -- so it's not as dilutive to your leverage metric initially given the in-place EBITDA. The other thing I'd say about those is that everybody looks at the going-in multiple and says, "Oh, well, expansion is better opportunity than the acquisition side."

And what I would say about that is you can't just look at the going-in multiple on something because on an acquisition, you get the cash flow immediately. On an expansion project, you have a little bit of a drag.

And so you could have a higher going-in multiple on an acquisition than you have on an expansion and still have similar IRRs. And so they all -- those things all compete for capital.

But right now, we don't feel like we are capital constrained at all.

The next question is from Keith Stanley with Wolfe Research.

First, I just want to confirm the full year outlook being 5% ahead of the EBITDA budget? It seems like that just reflects the outperformance in the first half of the year.

Why wouldn't the second half outlook potentially be better given the momentum you're seeing year-to-date?

Okay. So I think, one, obviously, in the first quarter, we had a winter storm.

We've had some Waha spreads. We had a little bit of onetimes.

In the second quarter, we don't have that much. In fact, nothing material that I would call onetime.

And so the second quarter reflects pretty strong performance across the base business. I also think that it's debatable whether all of the winter storm is a onetime because I think the system, as tight as it is and when you're going to get volatility, you're just going to -- the demand for our services and our assets is just going to be greater for the foreseeable future.

I think generally, we try to be somewhat conservative when we project out for the balance of the year. There is some outperformance that is baked into this guidance for the balance of the year, just not as much as what we saw in the first half of the year given some of the things that happened in the first quarter.

Okay. Second question, it's kind of a high-level question on how to think about this shadow backlog concept.

So you introduced the $10 billion shadow backlog, I think, about a year ago now. I think you sanctioned around $2 billion of projects.

You indicated kind of you'd expect to sanction at least another $1 billion in the second half of the year today, so it's about $3 billion over 18 months. Looking forward, would you expect the pace of converting that shadow backlog to a sanctioned backlog to be faster over the next year or 2, a similar cadence?

Or is it too hard to say?

I think it's hard to say when things come to fruition, but I think we see a good line of sight of sanctioning a fair number of projects in the back half of this year. And so I mean, I think we are bullish on the opportunities of adding.

I'd also point out that the $10 billion hasn't decreased despite the fact that we added $2 billion and are looking to add at least $1 billion in the back half of the year. And so our opportunity set has continued to grow.

The next question is from John Mackay with Goldman Sachs.

I think I'm actually going to ask two -- both of Keith's questions in another way. But just looking at the backlog, and again, to that point of kind of potentially announcing another $1 billion of projects later this year to offset the $1 billion coming online.

I mean, is $10 billion generally where you expect the backlog to be able to hold going forward? Or is there room for that number to move meaningfully higher?

There's room for the number to move higher.

Appreciate that. And then...

Cutting off to this $1 billion number, I think. I think what Kim is trying to say is we have a lot of opportunities.

And we expect to do at least that kind of thing, that $1 billion threshold. So I wouldn't take that as that's all we're going to do in the last half of this year.

There's a lot of opportunities out there, and I think we're poised to move quickly on them. But again, we have to get the horses in the corral.

Understood. That makes a lot of sense.

And then just on the '26 guidance, I mean, I understand the point of being a little conservative around the back half guide, but it was such a strong quarter. I guess I'm just wondering if you could point to maybe a little bit more of on the ground, from an operational standpoint, what some of the outperformance was coming from?

And again, maybe framing up why that could be a new run rate earnings level for some of these segments?

Yes. I'll highlight a few, and then Kim can -- so one, I would point out that the CO2 oil production was very strong.

That's one of the larger outperformers for the quarter versus our budget. We had -- SACROC is year-to-date, up 15% over last year, which is better than what we had expected.

Commodity prices, obviously, with the Iran conflict, contributed to outperformance across multiple assets across multiple business units. So that contributed in the quarter.

Our Natural Gas business, both in the Texas intrastate and across other interstate systems, continue to squeeze out additional margins, margins in the Texas intrastate business. And then capacity sales at greater rates and greater capacity than what we had expected in the interstate business.

And so some of those are hard to call for the rest of the year if that's going to continue for the rest of the year. Commodity prices are out of our hands.

And so that's probably part of the reason why for the rest of the year, we haven't projected as much outperformance for the rest of the year relative to what we experienced in the second quarter. And Kim already touched on the first quarter, we mentioned a lot of these, what I would characterize as kind of nonrecurring -- potentially nonrecurring.

We had really stronger winter weather relative to historical norms and extended cold periods that led to some outperformance across some of our natural gas assets. We had a contract buyout in our terminals group.

So some of those are the things that led to a little bit of outperformance in the first quarter. So for the rest of the year, while we're still expecting that these kind of nonrecurring items are less than half of our overall outperformance for the full year, we've probably taken a little bit more of a conservative guide for the second half of 2026.

Next question is from Jason Gabelman with TD Cowen.

I wanted to go back to the discussion of adding $1 billion perhaps in new projects by the end of this year. I'm just trying to understand how Western Gateway fits into that because there's going to be, as I understand it, a cash contribution to the project, and then you're going to contribute assets as well.

So as you think about how Western Gateway accounts for some of that $1 billion, is it the total cash plus asset that you're contributing to the joint venture? Or is it just the cash portion?

Let me point out two things. Like Rich just said, what we said is at least $1 billion.

And so it could be more than that. Absolutely.

And again, I think it's absolutely possible that the $10 billion, we could go above the $10 billion backlog. And so I think we're saying the opportunity set here is just really tremendous.

What is hard to call is the timing of it. And so we want to be somewhat conservative about calling our timing because you're negotiating with customers, and they don't -- everybody doesn't always move at the pace that you expect.

With respect to Western Gateway, when we talk about the $1 billion, we are not talking about our asset contributions to that. To the extent that it would be part of the $1 billion, we would just be counting the cash contribution.

Great. And my follow-up is on the start-up of GCX expansion.

And I think the market has been a bit surprised that just with a little bit more egress out of the Permian Basin, Waha spreads have really come in. So just wondering if you saw that GCX expansion fill up pretty quickly immediately or if there's some space left on it?

No. So I think it was waiting on capacity.

So as soon as we got it up, it pretty much was full. And that's been the case on all of our projects out of the Permian.

They've been pretty full as we brought some facilities on. So I think what you're probably seeing is maybe less of the maintenance activity around that also probably contributed to some of that.

But GCX in itself has been full.

And the next question is from Sunil Sibal with Seaport Global Securities.

I just had a follow-up on your comments regarding the Haynesville volumes. So I think you mentioned that you expect another Bcf per day of Haynesville volumes coming online in the near term.

I was curious, do you see any price sensitivity to those volumes? Or those are kind of pretty much visible because of the minimum volume commitments or offtake on the demand side that you may be seeing?

Yes. Sunil, what I was saying is we are adding a Bcf of processing capacity, treating capacity.

And so we have -- right now, where we are is our system is effectively full. And so we're offloading any volumes that come on to our Haynesville system.

And so we're trying to catch up. Those offloads are, from a margin standpoint, not as accretive as us keeping those on our own system.

So we're adding a Bcf of treating capacity. And if the demand profiles hold up, the production should be there to support it.

And we just got to have the capabilities to get it from point A to point B. And so that's all we're saying.

And then on price sensitivity, I'd say our largest customers have hedged. And so I would expect that most of those volumes that we're expecting are going to be price insensitive.

Understood. And then thanks for your comments on the GCX volumes.

I was curious, although there are a number of gas pipeline projects in pipeline, are you starting to see discussion with customers on the next phase of growth in Permian, considering what we are seeing in the commodity markets?

Yes. Look, I mean, we are -- our Permian Link project is just one example.

There's a lot of discussion going on. It all depends on where the demand.

I think one theme you're seeing now is where the demand is going to show up is where -- that's where the molecules are trying to point. And so as those demand centers start developing, that's where those discussions will lead.

But I mean, we are in discussions today with customers about several options out of the Permian.

And at this time, I'm showing no further questions.

Okay. Thank you, all.

I hope everybody has a good evening. Thank you.

This concludes today's call. Thank you for your participation, and you may disconnect at this time.