Kinder Morgan (NYSE:KMI) recently reported somewhat disappointing third-quarter results. Not only did the energy company's earnings come in a bit shy of its budget, but it also had some issues with its growth prospects. One of the most concerning was a large decline in its expansion project backlog.

It's now unclear how fast the company will be able to grow in the coming years. While it still has time to replenish its backlog, concerns about the clarity of its growth prospects could begin to weigh on the pipeline company's stock price.

A man looks with a worried expression at a chart on a laptop.

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Falling short

Kinder Morgan's CEO Steve Kean addressed the company's backlog on the third-quarter conference call, saying: "[T]he backlog fell quarter-to-quarter and now stands at $4.1 billion. That's primarily because we placed Elba unit one and GCX -- two of our largest projects in the backlog -- in service at the end of the quarter." Overall, the backlog declined by a net of $1.6 billion during the quarter.

While the company did add about $200 million of new projects during the quarter, that only pushed its year-to-date total to $1.2 billion. That has the company on track to come in well below its target range of greenlighting $2 billion to $3 billion of new projects each year.

Kean noted several reasons the company hasn't added very many new projects this year. One is that it remains disciplined and will only approve those that meet its return criteria. That's why it walked away from an opportunity to build an oil export facility earlier this year.

Meanwhile, progress on some of its other development opportunities has been slower than expected. Kean specifically pointed to the Permian Pass pipeline, which is a third gas pipeline it's trying to build in the Permian. The company has been working to sign up customers for capacity on this system.

Kean noted:

This is a work in progress. It's not in the backlog at this point. And since we reported on this on the second-quarter call, the commercial activity has slowed, but it continues. It slowed as a result of some producer retrenchment in their Permian activities. We believe the pipeline is needed, but it may not be needed quite as soon as we were expecting three months ago. With a total of three new 2 BCF-a-day projects coming online over the 2019 to 2021 period, both of ours as well as the third-party pipeline. The Permian Pass Pipeline may not be needed in 2022. In the meantime, we're continuing to work with customers and potential partners and believe the long-term dynamics of needed gas takeaway capacity out of the Permian Basin and our extensive pipeline network in Texas put us in a good position.

As Kean notes, the company hasn't signed up customers to this new pipeline as fast as it had initially anticipated. That's due in large part to the continued volatility in the oil market, which is causing many drillers to re-evaluate their long-term growth plans. While the company believes the market will eventually need this pipeline, it looks like a 2023 opportunity now. It probably won't go into the backlog this year, as the company had initially hoped.

Hopefully, but not desperate

Kinder Morgan isn't yet worried about its growth prospects. Kean stated on the call that "we believe based on our historical experience and on the size of our network and the market dynamics at play, particularly in natural gas, that we'll continue to provide the opportunity to invest in $2 billion to $3 billion a year in attractive return expansion projects." That has been the case over the past decade, as the company has invested an average of $2.5 billion on expansion projects per year. Meanwhile, the energy industry needs to spend an estimated $44 billion per year on new infrastructure in North America through 2035, including $23 billion annually on gas-related assets. The company should have plenty of options to expand in the coming years.

However, Kean also made it clear that the company wouldn't green-light projects just so that it can grow its size. "[I]f we don't find that much in new opportunities, we are not going to force it," he said. "We have other opportunities to deliver value to our shareholders, and we expect to maintain our discipline." Among its other options to create value for shareholders is to pay down debt, buy back stock, or increase its dividend. That's why the company isn't worried about its ability to enrich investors, even if its growth prospects seem dim at the moment.