Kinder Morgan Announces 2017 Financial Expectations
December 05 2016 - 4:05PM
Business Wire
Kinder Morgan, Inc. (NYSE: KMI) today announced its preliminary
2017 financial projections. “The fundamentals of our business
remain strong. We expect to generate $4.46 billion of distributable
cash flow for 2017 which continues to provide us great strength and
flexibility. We are also confident in our outlook for growth,
largely supported by our $13 billion backlog of energy
infrastructure expansion opportunities that have a high probability
of completion over the next few years,” said Steve Kean, president
and CEO. Below is a summary of KMI’s expectations for 2017:
- Continue to maximize shareholder value,
which includes maintaining a solid investment grade rating and
continuing to pursue attractive return projects and acquisitions.
As its backlog of projects continues to be placed in service, the
company expects to generate cash flow in excess of its investment
needs. KMI currently believes the best way to maximize shareholder
value will be to use a significant portion of that excess cash to
increase its dividend. KMI expects to declare dividends of $0.50
per share in 2017. KMI also expects to provide guidance on a
revised dividend policy in the latter part of 2017, with a view
toward delivering additional value to its shareholders in
2018.
- End 2017 with debt-to-Adjusted EBITDA
ratio of 5.4 times, with expected improvement based on additional
proceeds generated by joint ventures. The company is committed to
the continued strengthening of its investment grade balance sheet
and is pursuing select joint ventures to accelerate that process.
KMI’s 2017 budget assumes a joint venture partner on the company’s
TransMountain expansion project and contributions from that partner
to fund its share of expansion capital, but does not include any
potential proceeds in excess of the partner’s share of expansion
capital to recognize the value created in developing the project to
this stage. KMI expects to receive such proceeds, but did not
attempt to quantify them for budget purposes.
- Generate $1.99 per share of
distributable cash flow and $7.2 billion of Adjusted EBITDA,
essentially flat to 2016 with contributions from expansion projects
coming into service largely offsetting the full year effect of the
Sept. 1, 2016, sale of a 50 percent interest in SNG, the year over
year decline in realized oil prices in its CO2 segment, lower
contributions from certain gathering and processing assets, and the
impact from a rate case on CIG settled during 2016.
- Invest $3.2 billion on expansion
projects in 2017 and fund with excess, internally generated cash
flow, with no need to access equity markets during 2017.
- KMI does not provide budgeted net
income attributable to common stockholders (the GAAP financial
measure most directly comparable to the non-GAAP financial measures
distributable cash flow and Adjusted EBITDA) due to the inherent
difficulty and impracticality of quantifying certain amounts
required by GAAP such as ineffectiveness on commodity, interest
rate and foreign currency hedges, unrealized gains and losses on
derivatives marked to market, and potential changes in estimates
for certain contingent liabilities.
KMI’s expectations assume average annual prices for West Texas
Intermediate (WTI) crude oil and Henry Hub natural gas of $53 per
barrel and $3 per MMBtu, respectively, and which were consistent
with forward pricing during the budget process. The vast majority
of cash generated by KMI is fee-based and therefore is not directly
exposed to commodity prices. The primary area where KMI has
commodity price sensitivity is in its CO2 segment, where KMI hedges
the majority of its next 12 months of oil production to minimize
this sensitivity. For 2017, the company estimates that every $1 per
barrel change in the average WTI crude oil price impacts
distributable cash flow by approximately $6 million and each $0.10
per MMBtu change in the price of natural gas impacts distributable
cash flow by approximately $1 million.
The KMI board of directors will review the 2017 budget for
approval at the January board meeting and the budget will be
discussed in detail by management during the company’s annual
analyst meeting to be held on Jan. 25, 2017, in Houston, Texas.
Kinder Morgan remains committed to transparency and will continue
to publish its budget on the company’s website,
www.kindermorgan.com. The 2017 budget will be the standard by which
KMI measures its performance next year and will be a factor in
determining employee compensation.
Kinder Morgan, Inc. (NYSE: KMI) is the largest energy
infrastructure company in America. It owns an interest in or
operates approximately 84,000 miles of pipelines and approximately
180 terminals. KMI’s pipelines transport natural gas, gasoline,
crude oil, CO2 and other products, and its terminals store
petroleum products and chemicals, and handle bulk materials like
coal and petroleum coke. For more information please visit
www.kindermorgan.com.
Non-GAAP Financial
Measures
The non-generally accepted accounting principles (non-GAAP)
financial measures of distributable cash flow (DCF), both in the
aggregate and per share and net income before interest expense,
taxes, depreciation, depletion, amortization and amortization of
cost of equity investments and certain items (Adjusted EBITDA) are
presented herein.
Certain items are items that are
required by GAAP to be reflected in net income, but typically
either (1) do not have a cash impact (for example, asset
impairments), or (2) by their nature are separately identifiable
from our normal business operations and in our view are likely to
occur only sporadically (for example certain legal settlements,
hurricane impacts and casualty losses).
DCF is a significant performance
measure used by us and by external users of our financial
statements to evaluate our performance and to measure and estimate
the ability of our assets to generate cash earnings after servicing
our debt and preferred stock dividends, paying cash taxes and
expending sustaining capital, that could be used for discretionary
purposes such as common stock dividends, stock repurchases,
retirement of debt, or expansion capital expenditures. Management
uses this measure and believes it provides users of our financial
statements a useful measure reflective of our business’s ability to
generate cash earnings to supplement the comparable GAAP measure.
We believe the GAAP measure most directly comparable to DCF is net
income available to common stockholders. DCF per share is DCF
divided by average outstanding shares, including restricted stock
awards that participate in dividends.
Adjusted EBITDA is used by
management and external users, in conjunction with our net debt, to
evaluate certain leverage metrics. Therefore, we believe Adjusted
EBITDA is useful to investors. We believe the GAAP measure most
directly comparable to Adjusted EBITDA is net income available to
common stockholders. Adjusted EBITDA is calculated by adjusting net
income before interest expense, taxes, and DD&A (EBITDA) for
certain items, noncontrolling interests before certain items, and
KMI’s share of certain equity investees’ DD&A and book
taxes.
Our non-GAAP measures described above should not be considered
alternatives to GAAP net income or other GAAP measures and have
important limitations as analytical tools. Our computations of DCF
and Adjusted EBITDA may differ from similarly titled measures used
by others. You should not consider these non-GAAP measures in
isolation or as substitutes for an analysis of our results as
reported under GAAP. DCF should not be used as an alternative to
net cash provided by operating activities computed under GAAP.
Management compensates for the limitations of these non-GAAP
measures by reviewing our comparable GAAP measures, understanding
the differences between the measures and taking this information
into account in its analysis and its decision making processes.
Important Information Relating to
Forward-Looking Statements
This news release includes forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995 and Section 21E of the Securities and Exchange Act of 1934.
Generally the words “expects,” “believes,” anticipates,” “plans,”
“will,” “shall,” “estimates,” and similar expressions identify
forward-looking statements, which are generally not historical in
nature. Forward-looking statements are subject to risks and
uncertainties and are based on the beliefs and assumptions of
management, based on information currently available to them.
Although Kinder Morgan believes that these forward-looking
statements are based on reasonable assumptions, it can give no
assurance that any such forward-looking statements will
materialize. Important factors that could cause actual results to
differ materially from those expressed in or implied from these
forward-looking statements include the risks and uncertainties
described in Kinder Morgan’s reports filed with the Securities and
Exchange Commission (SEC), including its Annual Report on Form 10-K
for the year-ended December 31, 2015 (under the headings “Risk
Factors” and “Information Regarding Forward-Looking Statements” and
elsewhere) and its subsequent reports, which are available through
the SEC’s EDGAR system at www.sec.gov and on our website at
ir.kindermorgan.com. Forward-looking statements speak only as of
the date they were made, and except to the extent required by law,
Kinder Morgan undertakes no obligation to update any
forward-looking statement because of new information, future events
or other factors. Because of these risks and uncertainties, readers
should not place undue reliance on these forward-looking
statements.
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Kinder Morgan, Inc.Dave Conover, (713) 369-9407Media
Relationsdave_conover@kindermorgan.comorInvestor Relations(713)
369-9490km_ir@kindermorgan.comwww.kindermorgan.com
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