Forget High-Flying Oil Drillers: 1 Fee-Based Midstream Giant to Buy Right Now
Forget High-Flying Oil Drillers: 1 Fee-Based Midstream Giant to Buy Right Now
Alex SiroisSat, June 6, 2026 at 3:40 PM UTC
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EOG's net income crashed 44% YoY and debt doubled to $7.94B, making KMI's fee-based pipeline tolls the smarter supply-shock hedge.
KMI's $10B contracted backlog, S&P upgrade to BBB+, and growing LNG export contracts deliver durable cash flows at a 3.48% dividend yield.
Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and EOG Resources didn't make the cut. Grab the names FREE today.
EOG Resources (NYSE:EOG) is the name every oil bull is screaming about as WTI crude spiked to $114.58 in early April 2026 and traders pile into upstream drillers to play the Iran war supply shock.
The EOG Trade Is a Sugar High
Geopolitical premium fades. It always does. And when it does, EOG holders get to relive the Q4 2025 income statement: GAAP net income collapsed to $701 million from $1.25 billion year over year, a 43.96% drop, with operating income down 40.77% YoY after the company absorbed $506 million in after-tax impairment charges on Barnett Shale and Woodford Oil Window assets. Realized crude prices fell from $71.66 to $59.54 per barrel in a single year and free cash flow dropped 30.04%. To top it off, total debt ballooned from $4.75 billion to $7.94 billion to fund the Encino deal, and Piper Sandler trimmed its price target citing a less constructive oil macro.
Now look at the chart. EOG is up 31.95% year to date and trading at $136.20, near the upper end of its 52-week range topping at $150.70. The forward multiple of 8x looks cheap only if you assume $110 crude is permanent. It is not.
The Better Trade: Kinder Morgan
Redirect your attention to Kinder Morgan (NYSE:KMI), the $73.7 billion fee-based pipeline giant that earns the same toll whether WTI prints $85 or $115. Long-term, fixed-fee take-or-pay infrastructure contracts insulate substantial cash flows, and three things make this the retirement-portfolio trade of the year.
1. A $10 billion contracted backlog. Approximately 90% is tied to natural gas infrastructure and nearly 60% supports power generation, with the $1.8 billion Trident Intrastate Pipeline in service Q1 2027 and the $3.5 billion South System Expansion 4 already locked down. Backlog grew by $912 million in Q4 alone.
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Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and EOG Resources didn't make the cut. Grab the names FREE today.
2. The LNG and data center tailwind is structural. The EIA projects U.S. LNG export capacity will increase to 27.7 Bcf/d by 2030 from 14.9 Bcf/d in 2025. Kinder Morgan already has long-term contracts to move 8 Bcf/d to LNG facilities, growing to 12 Bcf/d by end of 2028. And roughly 70% of future data center power demand is in states served by KMI assets. Q4 transport volumes rose 9% YoY and gathering volumes jumped 19%.
3. Cash returns are real and growing. Adjusted EBITDA hit $2.27 billion in Q4 2025, up 10% YoY, free cash flow rose 18% to $0.9 billion, and S&P upgraded the senior unsecured rating to BBB+ in January 2026. Management guided 2026 dividends to $1.19 per share, up 2%, and the most recent quarterly payout already stepped up to $0.2975, ex-dividend May 4, 2026.
CEO Kim Dang summed it up plainly: "Led by record-setting performance in our Natural Gas Pipelines business segment, the company delivered its highest ever fourth quarter and full-year net income attributable to KMI and Adjusted EBITDA."
The Bottom Line
EOG is a leveraged bet that geopolitics stays bad. Kinder Morgan gets paid either way, at a 3.48% dividend yield with a backlog stretching past 2029. Investors looking for a supply-shock hedge may want to research KMI alongside the upstream drillers everyone else is crowding into.
Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and EOG Resources didn't make the cut. Grab the names FREE today.
Source: “AOL Money”
