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Pipes are seen at the Kinder Morgan Trans Mountain facility in Edmonton on April 6, 2017.

JONATHAN HAYWARD/The Canadian Press

U.S. pipeline operator Kinder Morgan Inc. on Thursday said it expects core earnings to increase slightly next year and signalled it would move to cut its debt load and increase its dividend.

Investors this year have pushed U.S. oil and gas pipeline companies to improve their financial health and deliver positive free cash flow. Low energy prices have pressured pipeline earnings and some projects have stalled as U.S. shale drillers idled rigs.

Kinder Morgan said it expected adjusted pretax earnings of US$7.6-billion next year, in line with Wall Street estimates but slightly up from a recent forecast of US$7.56-billion in the third quarter.

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At the end of 2018, the company had forecast adjusted pretax earnings of US$7.8-billion, but lowered estimates by about 3 per cent in the third quarter because of a delay in the commercial start-up of its liquefied natural gas (LNG) export facility at Elba Island, lower commodity prices and other factors.

Kinder Morgan shares on Thursday rose 38 cents, or almost 2 per cent, to US$19.68. The company’s shares have risen about 28 per cent for the year.

The company plans to spend US$2.4-billion on expansion projects and joint ventures next year, down from US$3.1-billion last year but still above estimates.

Kinder Morgan expected to generate US$5.1-billion of distributable cash flow in 2020, about 3 per cent higher than the current forecast for 2019.

Chief executive Steve Kean pointed to new projects coming online, lower interest expense and improved realized prices in its CO2 business, though he said the growth was partially offset by lower re-contracting rates on some natural gas pipeline assets and crude and condensate assets.

The company said it plans to increase its dividend to US$1.25 per share, annualized, next year, and expects to use internally generated cash flow to fully fund the dividend. The 2020 dividend would be up 25 per cent from last year, the company said.

It expects to reduce the ratio of debt to adjusted pretax earnings to 4.3 next year, compared with an anticipated 4.4 by year-end and 4.7 in the third quarter. It will use proceeds from asset sales, including the sale of the U.S. portion of its Cochin pipeline and its Canadian unit, to pay down debt.

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The moves would give Kinder Morgan the financial flexibility to either repurchase shares or invest in attractive projects, providing an estimated US$1.2-billion, the company said.

“We think that building this financial flexibility into our 2020 budget is the right decision for our shareholders,” Mr. Kean said.

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