Kinder Morgan (NYSE:KMI) reports its fourth-quarter results Jan. 16 after the markets close. Kinder Morgan’s report was a mixed bag with earnings 5% higher than what analysts were expecting but revenues 3% less than the consensus estimate. Heading into Wednesday’s results, owners of KMI stock are hoping it can deliver another earnings surprise. But will it?

Analysts expect Kinder Morgan to deliver earnings of 25 cents on $3.9 billion in revenue. If KMI hits the consensus, it will have increased earnings and revenues by 19% and 8% year-over-year, respectively.

That’s the good news if you own KMI stock.

Too Much Debt

The bad news is that Kinder Morgan continues to carry a whole lot of debt despite reaping a $1.3 billion after-tax profit from selling its Trans Mountain pipeline assets to the Canadian federal government in September for CAD$4.5 billion.

While the sale extricates Kinder Morgan from a situation that would have cost it billions and taken an eternity to build, it does reduce the company’s cash flow.

However, the company’s 70%-owned Canadian subsidiary, Kinder Morgan Canada (OTCMKTS:KMLGD), returned $11.40 in capital per restricted voting share in January, which should provide the parent with almost CAD$2.8 in proceeds to reduce its debt.

Also, Kinder Morgan Canada is moving to sell its remaining Canadian assets at a time when seller’s are getting reasonable prices, so that too should bring down the parent’s debt by the end of fiscal 2019.

“On the KML assets, we think they’re great assets,” said Kinder Morgan CEO Steve Kean in October. “We think that asset packages like this are rare, anywhere, but they’re rare to come to market and they’re rare to come to market in Western Canada, so we do think that it tends to be a bit of seller’s market for these assets.”

Kinder Morgan’s debt repayment from the Trans Mountain sale will come in Q1 2019. At the end of the third quarter, the company had total debt of $37 billion or almost its entire market cap. By comparison, Exxon Mobil (NYSE:XOM) had $41.2 billion in total debt at the end of the third quarter, 14% of its entire market cap.

It’s incumbent upon the company and CEO Kean to provide a complete discussion about its plans for deleveraging. If it’s not entirely candid about this necessary piece of the ongoing Kinder Morgan turnaround, KMI stock could take a real hit in the days and weeks following its Q4 earnings announcement.

Kinder Morgan’s Plans for 2019

In December, Kinder Morgan laid out its expectations for the year ahead.

The company expects to generate $5 billion in distributable cash flow ($2.20 a share), 10% higher than in 2018. Despite selling Trans Mountain, it still sees a 4% increase in adjusted EBITDA to $7.8 billion despite not having the Trans Mountain assets generating cash flow.

By the end of 2019, it expects to have a net debt-to-adjusted EBITDA ratio of 4.5. Given it only made these comments a little over a month ago, I wouldn’t expect much of a change on this front.

The Bottom Line on KMI Stock

Heading into the last two weeks of January, Goldman Sachs considers Kinder Morgan stock to be the best buy among midstream energy stocks, which it sees having a good year on the markets thanks to all the new projects coming online combined with higher volumes.

It’s likely just business as usual when Kinder Morgan reports its Q4 report.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.