Progressing Major Projects; Strengthening
Balance Sheet
Kinder Morgan, Inc. (NYSE: KMI) today announced that its board
of directors approved a cash dividend of $0.125 per share for the
quarter ($0.50 annualized) payable on May 15, 2017, to common
shareholders of record as of the close of business on May 1, 2017.
KMI expects to declare dividends of $0.50 per share for 2017 and
use cash in excess of dividend payments to fully fund growth
investments and further strengthen its balance sheet.
Richard D. Kinder, executive chairman, said, “We are pleased to
have made additional progress on our two largest growth projects:
Trans Mountain expansion and Elba Island Liquefaction. These are
signature energy infrastructure assets for North America, and we
expect they will contribute greatly to Kinder Morgan’s future
growth. With respect to Trans Mountain, after receiving approval
from the Canadian federal government and the province of British
Columbia to proceed with the project, we completed our final cost
estimate review process with the shippers. Despite the shippers’
right to terminate their contracts during this process, 100 percent
of the original committed capacity (707,500 thousand barrels per
day) remains under contract. Additionally, while making steady
progress constructing our Elba Island Liquefaction facility, we
welcomed EIG Global Energy Partners as a 49 percent joint venture
participant in that project.”
“Meanwhile, consistent with previous guidance, we continue to
develop financing alternatives for the Trans Mountain project,
either by bringing in a joint venture partner or conducting an
initial public offering of a portfolio that would include Trans
Mountain and other Kinder Morgan Canadian assets,” said Kinder. “In
doing so, we will stay on track toward our targeted leverage level
of around 5.0 times net debt-to-Adjusted EBITDA. That leverage
level will create options for us to return substantial value to
shareholders through some combination of dividend increases, share
repurchases, additional attractive growth projects or further debt
reduction. Consistent with previous guidance, we expect to announce
revised dividend guidance for 2018 in the latter part of this year.
This progress, combined with our world class portfolio of fee-based
energy infrastructure assets, the balancing of global crude oil
supply and demand, and a more positive federal legislative and
regulatory environment, makes us very confident about Kinder
Morgan’s future in the near-term and long-term.”
President and CEO Steve Kean said, “We are pleased with our
operational performance, which is slightly ahead of guidance we
provided in January for the quarter, and we remain on target for
the year. We generated earnings per common share for the quarter of
$0.18 and distributable cash flow of $0.54 per common share,
resulting in $935 million of excess distributable cash flow above
our dividend.”
Kean added, “We continue to drive future growth by completing
significant infrastructure development projects in our project
backlog. Our current project backlog is $11.7 billion, down from
$12.0 billion at the end of 2016. That total currently includes 100
percent of the Trans Mountain project costs and will be adjusted
when we decide on a financing alternative. The reduction was
primarily driven by placing the Kinder Morgan Export Terminal in
service. Excluding the CO2 segment projects, we expect the projects
in our backlog to generate an average capital-to-EBITDA multiple of
approximately 6.7 times.”
KMI reported first quarter net income available to common
stockholders of $401 million, compared to $276 million for the
first quarter of 2016, and distributable cash flow of $1,215
million that was essentially flat versus $1,233 million for the
comparable period in 2016. Net income available to common
stockholders was impacted by a $162 million favorable change in
total Certain Items compared to the first quarter of 2016. Certain
Items in that quarter were primarily driven by project write-offs
and losses on impairments and divestitures, partially offset by a
favorable non-cash interest expense certain item.
2017 Outlook
For 2017, KMI expects to declare dividends of $0.50 per share,
achieve distributable cash flow of approximately $4.46 billion
($1.99 per share) and Adjusted EBITDA of approximately $7.2
billion. KMI also expects to invest $3.2 billion in growth projects
during 2017, to be funded with internally generated cash flow
without the need to access equity markets, and to end the year with
a net debt-to-Adjusted EBITDA ratio of approximately 5.4 times.
KMI’s 2017 budget assumes a joint venture partner on the Trans
Mountain expansion project and contributions from that partner to
fund its share of growth 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 does not provide budgeted net income attributable
to common stockholders (the GAAP financial measure most directly
comparable to distributable cash flow and Adjusted EBITDA) due to
the inherent difficulty and impracticality of predicting 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 of $53 per barrel and Henry Hub
natural gas of $3 per MMBtu, consistent with forward pricing during
the company’s budget process. The vast majority of cash KMI
generates is fee-based and therefore not directly exposed to
commodity prices. The primary area where KMI has commodity price
sensitivity is in its CO2 segment, with the majority of the
segment’s next 12 months of oil and NGL production hedged to
minimize this sensitivity. The segment is currently hedged for
35,969 barrels per day (Bbl/d) at $58.71 per barrel for the
remainder of the year, as well as 18,427 Bbl/d at $62.80/Bbl in
2018; 11,000 Bbl/d at $56.13/Bbl in 2019; 6,000 Bbl/d at $53.35/Bbl
in 2020; and, 1,200 Bbl/d at $52.46/Bbl in 2021. 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.
Overview of Business
Segments
“The Natural Gas Pipelines segment’s performance for the
first quarter of 2017 was impacted by the third quarter 2016 sale
of a 50 percent interest in SNG, declines attributable to reduced
volumes affecting certain of our midstream gathering and processing
assets, and a negative impact on our Colorado Interstate Gas
Company (CIG) pipeline tariff rates as a result of a rate case
settlement reached during 2016. The segment benefited from
increased contributions from the Elba Express pipeline, which
resulted from the substantial completion of an expansion project in
the fourth quarter of 2016, and improved results from Natural Gas
Pipeline Company of America (NGPL) as a result of several favorable
factors including the completion of an expansion project to
increase service to the Chicago area,” Kean said.
Natural gas transport volumes were up 1 percent compared to the
first quarter of 2016, driven by higher throughput on the Tennessee
Gas Pipeline (TGP) due to projects placed in service, higher
throughput on NGPL due to deliveries to the Sabine Pass LNG
facility and to South Texas to meet continuing demand from Mexico,
higher throughput on the Texas Intrastate Natural Gas Pipelines due
to contracts going into effect after the first quarter of 2016, and
higher throughput on El Paso Natural Gas Pipeline due to colder
weather in California. The increases were partially offset by lower
throughput on the TransColorado pipeline due to lower Rockies
production, as well as lower throughput on Cheyenne Plains due to
fuel switching back to coal and on SNG due to a historically warm
winter in the region. Natural gas gathered volumes were down 15
percent from the first quarter of 2016 due primarily to lower
natural gas volumes on multiple systems gathering from the Eagle
Ford Shale and on the KinderHawk system.
Natural gas continues to be the fuel of choice for America and
the world’s evolving energy needs, and industry experts are
projecting U.S. natural gas demand, including net exports of
liquefied natural gas (LNG) and net exports to Mexico, to increase
by approximately 35 percent to almost 107 billion cubic feet per
day (Bcf/d) over the next 10 years. Of the natural gas consumed in
the U.S., about 40 percent moves on KMI pipelines. KMI expects
future natural gas infrastructure opportunities will be driven by
greater demand for gas-fired power generation across the country,
LNG exports, exports to Mexico, and continued industrial
development, particularly in the petrochemical industry. In fact,
compared to the first quarter of 2016, natural gas deliveries on
KMI pipelines to Mexico were up 16 percent, increasing by
approximately 391,000 dekatherms per day (Dth/d), and deliveries to
LNG facilities increased by approximately 548,000 Dth/d.
“The CO2 segment was impacted by slightly lower
commodity prices, as our realized weighted average oil price for
the quarter was $58.14 per barrel compared to $59.55 per barrel for
the first quarter of 2016,” Kean said. “Combined oil production
across all of our fields was down 5 percent compared to 2016 on a
net to Kinder Morgan basis, partially driven by project deferrals
at SACROC and Yates as well as reallocating capital to higher
return projects with longer lead times. First quarter 2017 net NGL
sales volumes of 10.2 thousand barrels per day (MBbl/d) were up 3
percent from 2016. Net CO2 volumes increased 12 percent versus the
first quarter of 2016 driven by strong demand from third parties,
working interest partners and our own operations.” Southwest
Colorado facilities produced record volumes of 1.339 Bcf/d and the
Cortez Pipeline experienced record throughput volume of 1.314 Bcf/d
for the quarter.
Combined gross oil production volumes averaged 53.5 MBbl/d for
the first quarter, down 4 percent from 56.0 MBbl/d for the same
period last year. SACROC’s first quarter gross production was 7
percent below first quarter 2016 results but slightly above 2017
budget, and Yates gross production was 6 percent below first
quarter 2016 results but 1 percent below plan. Both decreases were
partially driven by project deferrals during 2016 as well as
reallocating capital to higher return projects with longer lead
times. First quarter gross production from Katz, Goldsmith and Tall
Cotton was 7 percent above the same period in 2016, but below plan.
Gross NGL sales volumes were 20.4 MBbl/d during the quarter,
slightly ahead of first quarter 2016.
“The Terminals segment experienced strong performance at
our liquids terminals that account for close to 80 percent of the
segment’s business. Growth in the liquids business during the
quarter versus the first quarter of 2016 was driven by increased
contributions from our Jones Act tankers and various expansions
across our network, including the recently commissioned Kinder
Morgan Export Terminal, a 1.5 million barrel liquids terminal
development along the Houston Ship Channel,” Kean said. The
Magnolia State, Garden State, Bay State and American Endurance
tankers were delivered in May 2016, July 2016, September 2016 and
December 2016, respectively. The American Freedom tanker was
delivered in March 2017 and placed on-hire in early April 2017,
following final outfitting and a voyage to the U.S. Gulf Coast. All
of these tankers are contracted with major energy customers under
long-term charters.
The bulk terminals contribution was supported by improving
volumes at our coal and steel handling operations as global market
conditions for those commodities continue to improve.
“The Products Pipelines segment was largely in line with
first quarter 2016 performance,” Kean said.
Total refined products volumes were up 1 percent for the first
quarter versus the same period in 2016. NGL volumes were up 2
percent from the same period last year due to greater volumes on
Cochin and Cypress pipelines. Crude and condensate pipeline volumes
were up 1 percent from the first quarter of 2016, with strong
performance by Kinder Morgan Crude and Condensate Pipeline.
Kinder Morgan Canada contributions were down 7 percent in
the first quarter of 2017 compared to the first quarter of 2016
largely due to operating expense timing changes and a 17 percent
decrease in volumes to Washington state, caused by narrowing price
differentials with competing sources.
Other News
Natural Gas Pipelines
- On Feb. 28, 2017, KMI announced that
investment funds managed by EIG Global Energy Partners (EIG) became
a 49 percent joint venture participant in Elba Liquefaction
Company, L.L.C. (ELC). ELC will own 10 liquefaction units and other
ancillary equipment comprising approximately 70 percent of the
nearly $2 billion Elba Island Liquefaction Project under
construction at KMI’s existing Southern LNG Company facility near
Savannah, Georgia. To acquire its membership interest, EIG made a
cash payment of approximately $385 million, consisting of: a $215
million reimbursement to KMI for EIG’s 49 percent share of prior
ELC capital expenditures, excluding capitalized interest; and a
payment of approximately $170 million excess of capital
expenditures in consideration of the value created by KMI in
developing the project to this stage. The liquefaction project is
supported by a 20-year contract with Shell. Initial in-service is
expected in mid-2018. Final units coming on line by early 2019 will
bring total liquefaction capacity to approximately 2.5 million
tonnes per year of LNG, equivalent to approximately 350 million
cubic feet per day of natural gas.
- On Feb. 3, 2017, Southern Natural Gas
Company, L.L.C. (SNG), a joint venture equally owned by
subsidiaries of KMI and Southern Company, filed an application with
the Federal Energy Regulatory Commission (FERC) for the Fairburn
Expansion Project in Georgia. The $240 million project is designed
to provide approximately 340,000 Dth/d of incremental long-term
firm natural gas transportation capacity into the Southeast market,
and includes the construction of a new compressor station, 6.5
miles of new pipeline and pipeline loop, new meter stations and
other upgrades on the current SNG system, as well as acquisition of
certain assets from Southern Company.
- Work continues on the approximately
$285 million EEC Modification and SNG Zone 3 Expansion Projects,
which are supported by long-term customer contracts. Two phases
representing greater than 70 percent of the approximately 853,000
Dth/d incremental capacity are now in service. The SNG Zone 3
Project will be completed later this year, and additional
compression is planned to be added in 2018 to complete the EEC
Modification Project.
- On Feb. 27, 2017, TGP received FERC
Notice to Proceed (NTP) on Station 875, a new compressor station in
Kentucky, for the planned Broad Run Expansion Project. All FERC
approvals have been received with the exception of NTP on Station
563 near Nashville, Tennessee. A limited number of state and local
permits in Tennessee and Kentucky are pending. The project, which
is expected to be placed in service in June 2018, will provide an
incremental 200,000 Dth/d of firm transportation capacity along the
same capacity path as the Broad Run Flexibility Project, which was
placed in service in late 2015. Antero Resources was awarded a
total of 790,000 Dth/d of 15-year firm capacity under the two
projects from a receipt point on TGP’s existing Broad Run Lateral
in West Virginia to delivery points in Mississippi and Louisiana.
Estimated capital expenditures for the combined projects total
approximately $800 million.
- Following receipt of required FERC
approvals, construction is now underway on five other TGP projects
with in-service dates in 2017 and 2018:
- The approximately $179 million
Southwest Louisiana Supply Project, which received FERC NTP during
the first quarter of 2017, will provide 900,000 Dth/d of capacity
to the Cameron LNG export facility in Cameron Parish, Louisiana.
In-service is planned in the first quarter of 2018.
- The approximately $156 million
Susquehanna West Project, which received FERC NTP on Jan. 4, 2017,
will provide 145,000 Dth/d of capacity for one customer. In-service
is planned in November 2017.
- The approximately $142 million Orion
Project, which received its FERC Certificate on Feb. 2, 2017, and
NTP on March 15, 2017, will provide 135,000 Dth/d of capacity for
three customers. In-service is planned in June 2018.
- The approximately $67 million Triad
Project, which received FERC NTP on Feb. 15, 2017, will provide
180,000 Dth/d of capacity for one customer. In-service is planned
in June 2018.
- The approximately $93 million
Connecticut Expansion Project, which received FERC full
construction NTP on April 12, 2017, will provide 72,100 Dth/d of
capacity for three local distribution company customers. In-service
is planned in November 2017.
- On March 22, 2017, KMI announced a
non-binding open season for the Gulf Coast Express Pipeline Project
that closes April 20, 2017, and subsequently announced that DCP
Midstream, LP, signed a letter of intent regarding their expected
participation in the development of the project as a partner and
shipper. The proposed pipeline would transport up to 1.7 Bcf/d of
natural gas from Waha to Agua Dulce, Texas, providing an outlet for
increased natural gas production from the Permian Basin to growing
markets along the Texas Gulf Coast. The 42-inch pipeline would
traverse approximately 430 miles and be in service in the second
half of 2019, pending shipper commitments.
- On Jan. 19, 2017, KMI was notified by
FERC of separate rate proceedings involving NGPL and WIC pursuant
to Section 5 of the Natural Gas Act. The companies are actively
defending their rates and fully expect the evidence to show that
the rates charged by NGPL and WIC have been and continue to be just
and reasonable. KMI does not believe that the ultimate resolution
of these proceedings will have a material adverse impact on results
of operations or cash flows from operations.
CO2
- Drilling operations and construction of
field facilities continue on the approximately $66 million second
phase of KMI’s Tall Cotton field project in Gaines County, Texas.
Tall Cotton is the industry’s first greenfield Residual Oil Zone
CO2 project, marking the first time CO2 has been used for enhanced
oil recovery in a field without a main pay zone. KMI continues to
expect first oil production from the second phase of the project to
occur in the second quarter of 2017.
- The company continues to find
high-return enhanced oil recovery projects in the current price
environment across its robust portfolio of assets.
Terminals
- Construction continues at KMI and
Keyera’s Base Line Terminal, a 50-50 joint venture crude oil
merchant storage terminal being developed in Edmonton, Alberta,
Canada. The 12-tank, 4.8 million barrel new-build facility is fully
contracted with long-term, firm take-or-pay agreements with strong,
creditworthy customers. KMI’s investment in the joint venture
terminal is approximately CAD$374 million. Commissioning is
expected to begin in the first quarter of 2018 with tanks phased
into service throughout that year.
- Work is substantially complete at the
Kinder Morgan Export Terminal (KMET) along the Houston Ship
Channel. The approximately $246 million project, supported by a
long-term contract with a major ship channel refiner, includes 12
storage tanks with 1.5 million barrels of storage capacity, one
ship dock, one barge dock and cross-channel pipelines to connect
with KMI’s Galena Park terminal. Storage tanks at KMET were placed
into service in January 2017 followed by the terminal’s full marine
capabilities, which were commissioned at the end of March
2017.
- Work continues on the previously
announced Pit 11 expansion project at KMI’s Pasadena terminal. The
approximately $185 million project, back-stopped by long-term
commitments from existing customers, adds 2.0 million barrels of
refined products storage to KMI’s best-in-class liquids storage hub
along the Houston Ship Channel. The first four tanks are expected
to be placed in service in the third quarter of 2017 with the
balance following in the fourth quarter of 2017.
- On March 25, 2017, KMI’s American
Petroleum Tankers (APT) took delivery of the American Freedom from
Philly Shipyard, Inc. (PSI) in Philadelphia, Pennsylvania, bringing
APT’s fleet size to 13 tankers. The final two vessels under
construction at PSI are scheduled for delivery in the third and
fourth quarters of 2017, while delivery of the final vessel
contracted from General Dynamics’ NASSCO shipyard in San Diego,
California, is scheduled for June 2017. The construction programs
at both PSI and NASSCO, which added nine ECO class vessels to APT’s
best-in-class fleet, remain on time and on budget. Each of the
330,000-barrel capacity and LNG conversion-ready tankers is fixed
under charter with a major energy company.
Products Pipelines
- KMI remains on schedule to begin
operations for the approximately $540 million Utopia Pipeline
Project in January 2018. Pipeline construction started in April
2017, and commissioning of the pipeline is anticipated in the
fourth quarter of 2017. The Utopia Pipeline will have an initial
design capacity of 50,000 barrels per day, and will move ethane
from Ohio to Windsor, Ontario, Canada. The project is fully
supported by a long-term, fee-based transportation agreement with a
petrochemical customer.
Kinder Morgan Canada
- Since receiving Government of Canada
approval in 2016, Kinder Morgan Canada has been moving forward with
the regulatory, commercial and construction planning aspects of the
Trans Mountain Expansion Project, achieving significant positive
progress. Next steps for the project include arranging acceptable
financing and a final investment decision by KMI’s board of
directors. Construction is set to begin in the fall of 2017, and
the project is expecting an in-service date of late 2019. In the
first quarter, the project successfully completed a final cost
review with its shippers and a supplemental open season. All
available long-term firm service capacity remains contracted on the
pipeline with a diverse group of 13 customers. The conclusion of
these steps demonstrates continued strong market support for the
project and the much-needed access to new markets it will bring to
Canadian producers, as well as providing a secure supply of
Canadian crude to refineries throughout the Pacific basin.
Collectively, the firm shippers have made 15- and 20-year
commitments of 707,500 barrels per day, or roughly 80 percent of
the capacity on the expanded pipeline, with the remaining 20
percent reserved for spot volumes as required by the National
Energy Board. Aboriginal support for the project continues to grow,
with 51 Aboriginal communities in support of the project.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy
infrastructure companies in North America. It owns an interest in
or operates approximately 84,000 miles of pipelines and
155 terminals. KMI’s pipelines transport natural gas, refined
petroleum products, crude oil, condensate, CO2 and other products,
and its terminals transload and store petroleum products, ethanol
and chemicals, and handle such products as steel, coal and
petroleum coke. It is also a leading producer of CO2 that we and
others use for enhanced oil recovery projects primarily in the
Permian basin. For more information please visit
www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. Eastern Time on
Wednesday, April 19, at www.kindermorgan.com for a
LIVE webcast conference call on the company’s first quarter
earnings.
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, segment earnings before depreciation,
depletion, amortization and amortization of excess cost of equity
investments (DD&A) and Certain Items (Segment EBDA before
Certain Items), net income before interest expense, taxes, DD&A
and Certain Items (Adjusted EBITDA), Adjusted Earnings and Adjusted
Earnings per share 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. A reconciliation of net
income available to common stockholders to DCF is provided herein.
DCF per share is DCF divided by average outstanding shares,
including restricted stock awards that participate in
dividends.
Segment EBDA before Certain Items
is used by management in its analysis of segment performance and
management of our business. General and administrative expenses are
generally not under the control of our segment operating managers,
and therefore, are not included when we measure business segment
operating performance. We believe Segment EBDA before Certain Items
is a significant performance metric because it provides us and
external users of our financial statements additional insight into
the ability of our segments to generate segment cash earnings on an
ongoing basis. We believe it is useful to investors because it is a
measure that management uses to allocate resources to our segments
and assess each segment’s performance. We believe the GAAP measure
most directly comparable to Segment EBDA before Certain Items is
segment earnings before DD&A and amortization of excess cost of
equity investments (Segment EBDA). Segment EBDA before Certain
Items is calculated by adjusting Segment EBDA for the Certain Items
attributable to a segment, which are specifically identified in the
footnotes to the accompanying tables.
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. 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, which are
specifically identified in the footnotes to the accompanying
tables.
Adjusted Earnings is used by
certain external users of our financial statements to assess the
earnings of our business excluding Certain Items as another
reflection of our business’s ability to generate earnings. We
believe the GAAP measure most directly comparable to Adjusted
Earnings is net income available to common stockholders. Adjusted
Earnings per share uses Adjusted Earnings and applies the same
two-class method used in arriving at diluted earnings per common
share.
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,
Segment EBDA before Certain Items 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 KMI 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 KMI’s reports
filed with the Securities and Exchange Commission (SEC), including
its Annual Report on Form 10-K for the year-ended December 31, 2016
(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, KMI 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.
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Statements of
Income
(Unaudited)
(In millions, except per share
amounts)
Three Months Ended March 31,
2017 2016 Revenues $
3,424 $ 3,195 Costs, expenses and other Costs
of sales 1,081 731 Operations and maintenance 513 565 Depreciation,
depletion and amortization 558 551 General and administrative 181
190 Taxes, other than income taxes 104 108 Loss on impairments and
divestitures, net 6 235 Other expense (income), net 1 (1 )
2,444 2,379 Operating income 980 816
Other income (expense) Earnings from equity investments 175 100
Loss on impairments and divestitures of equity investments, net
-
(6 ) Amortization of excess cost of equity investments (15 ) (14 )
Interest, net (465 ) (441 ) Other, net 16 13
Income before income taxes 691 468 Income tax expense (246 )
(154 ) Net income 445 314 Net (income) loss
attributable to noncontrolling interests (5 ) 1 Net
income attributable to Kinder Morgan, Inc. 440 315 Preferred
stock dividends (39 ) (39 )
Net income available to
common stockholders $ 401 $
276 Class P Shares Basic and diluted
earnings per common share $ 0.18 $ 0.12 Basic
weighted average common shares outstanding 2,230 2,229
Diluted weighted average common shares outstanding
2,230 2,229
Declared dividend per common
share $ 0.125 $ 0.125
Adjusted earnings per common share (1) $
0.17 $ 0.18 Segment
EBDA % change Natural Gas Pipelines $ 1,055 $ 994 6 %
CO2 218 187 17 % Terminals 307 260 18 % Products Pipelines 287 177
62 % Kinder Morgan Canada 43 46 (7 )%
Total
Segment EBDA $ 1,910 $ 1,664
15 % (1) Adjusted earnings per common share
uses adjusted earnings and applies the same two-class method used
in arriving at diluted earnings per common share. See the following
page, Preliminary Earnings Contribution by Business Segment, for a
reconciliation of net income available to common stockholders to
adjusted earnings.
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Earnings Contribution by
Business Segment
(Unaudited)
(In millions, except per share
amounts)
Three Months Ended March 31,
2017 2016 % change Segment EBDA
before certain items (1) Natural Gas Pipelines $ 1,019 $ 1,132 (10
)% CO2 222 224 (1 )% Terminals 302 276 9 % Product Pipelines 287
285 1 % Kinder Morgan Canada 43 46 (7 )% Subtotal
1,873 1,963 (5 )% DD&A and amortization of excess
investments (573 ) (565 ) General and administrative and corporate
charges (1) (2) (174 ) (185 ) Interest, net (1) (477 ) (510 )
Subtotal 649 703 Book taxes (1) (234 ) (257 )
Certain items Acquisition related costs (3) (4 ) (3 ) Pension plan
net benefit
-
1 Fair value amortization 17 24 Contract early termination earnings
(4) 22
-
Legal and environmental reserves (5) (2 ) (35 ) Change in fair
market value of derivative contracts (6) 6 30 Losses on impairments
and divestitures, net (5 ) (85 ) Project write-offs (7)
-
(170 ) Other 8 3 Subtotal certain items before tax 42
(235 ) Book tax certain items (12 ) 103 Total certain items
30 (132 ) Net income 445 314 Net (income) loss attributable
to noncontrolling interests (5 ) 1 Preferred stock dividends (39 )
(39 )
Net income available to common stockholders $
401 $ 276 Net income
available to common stockholders $ 401 $ 276 Total certain items
(30 ) 132 Noncontrolling interests certain item (8)
-
(6 ) Adjusted earnings 371 402 DD&A and amortization of
excess investments (9) 671 652 Total book taxes (10) 261 279 Cash
taxes (11) 3 (2 ) Other items (12) 13 10 Sustaining capital
expenditures (13) (104 ) (108 )
DCF $ 1,215
$ 1,233 Weighted average common shares
outstanding for dividends (14) 2,239 2,237 DCF per common share $
0.54 $ 0.55 Declared dividend per common share $ 0.125 $ 0.125
Adjusted EBITDA (15) $ 1,820 $ 1,883
Notes ($
million)
(1) Excludes certain items:1Q 2017 - Natural Gas
Pipelines $36, CO2 $(4), Terminals $5, general and administrative
and corporate charges $(7), interest expense $12, book tax $(12).1Q
2016 - Natural Gas Pipelines $(138), CO2 $(37), Terminals $(16),
Products Pipelines $(108), general and administrative and corporate
charges $(5), interest expense $69, book tax $103.
(2) Includes corporate charges:1Q 2017 - $91Q 2016 -
$8General and administrative expense is also net of management fee
revenues from an equity investee:1Q 2017 - $(9)1Q 2016 - $(8)
(3) Acquisition related costs for closed or pending
acquisitions.
(4) Comprised of income recognized
related to the early termination of customer contracts, including
income from the sale of a contract termination claim related to a
customer bankruptcy.
(5) Legal reserve adjustments
related to certain litigation and environmental matters.
(6) Gains or losses in our DCF are reflected when realized.
(7) Includes the following project write-offs:1Q 2016
includes $106 million of project write-offs associated with our
Northeast Energy Direct Market project and $64 million of
write-offs associated with our Palmetto project.
(8)
Represents noncontrolling interest share of certain items.
(9) Includes KMI's share of certain equity investees'
DD&A:1Q 2017 - $981Q 2016 - $87
(10) Excludes
book tax certain items. Also, includes KMI's share of taxable
equity investees' book tax expense:1Q 2017 - $271Q 2016 - $22
(11) Includes KMI's share of taxable equity
investees' cash taxes:1Q 2016 - $(4)
(12) Consists
primarily of non-cash compensation associated with our restricted
stock program.
(13) Includes KMI's share of certain
equity investees' sustaining capital expenditures (the same equity
investees for which DD&A is added back):1Q 2017 - $(18)1Q 2016
- $(22)
(14) Includes restricted stock awards that
participate in common share dividends.
(15) Adjusted
EBITDA is net income before certain items, less net income
attributable to noncontrolling interests before certain items, plus
DD&A (including KMI's share of certain equity investees'
DD&A), book taxes (including KMI’s share of equity investees’
book tax), and interest expense (before certain items). Adjusted
EBITDA is reconciled as follows, with any difference due to
rounding:
Three Months Ended March
31, 2017 2016 Net income $
445 $ 314 Total certain items (30 ) 132 Net income attributable to
noncontrolling interests before certain items (5 ) (5 ) DD&A
and amortization of excess investments (see (9) above) 671 652 Book
taxes (see (10) above) 262 279 Interest, net (see (1) above) 477
511 Adjusted EBITDA $ 1,820 $ 1,883
Volume Highlights
(historical pro forma for acquired
assets)
Three Months Ended March 31, 2017
2016 Natural Gas Pipelines Transport Volumes
(BBtu/d) (1) (2) 29,326 28,928 Sales Volumes (BBtu/d) (3) 2,563
2,331 Gas Gathering Volumes (BBtu/d) (2) (4) 2,712 3,207
Crude/Condensate Gathering Volumes (MBbl/d) (2) (5) 272 332
CO2 Southwest Colorado Production - Gross (Bcf/d) (6) 1.34 1.18
Southwest Colorado Production - Net (Bcf/d) (6) 0.66 0.59 Sacroc
Oil Production - Gross (MBbl/d) (7) 28.30 30.54 Sacroc Oil
Production - Net (MBbl/d) (8) 23.58 25.44 Yates Oil Production -
Gross (MBbl/d) (7) 17.87 19.03 Yates Oil Production - Net (MBbl/d)
(8) 8.00 8.47 Katz, Goldsmith, and Tall Cotton Oil Production -
Gross (MBbl/d) (7) 7.29 6.83 Katz, Goldsmith, and Tall Cotton Oil
Production - Net (MBbl/d) (8) 6.18 5.77 NGL Sales Volumes (MBbl/d)
(9) 10.16 9.90 Realized Weighted Average Oil Price per Bbl (10) $
58.14 $ 59.55 Realized Weighted Average NGL Price per Bbl $ 24.50 $
13.32 Terminals Liquids Leasable Capacity (MMBbl) 88.0 86.1
Liquids Utilization % 95.3 % 94.8 % Bulk Transload Tonnage (MMtons)
(11) 14.5 12.3 Ethanol (MMBbl) 17.7 15.3 Products Pipelines
Pacific, Calnev, and CFPL (MMBbl) Gasoline (12) 69.1 68.0 Diesel
24.6 24.8 Jet Fuel 22.6 22.1 Sub-Total Refined
Product Volumes - excl. Plantation 116.3 114.9 Plantation (MMBbl)
(13) Gasoline 20.3 20.7 Diesel 4.4 4.7 Jet Fuel 3.1 3.0
Sub-Total Refined Product Volumes - Plantation 27.8 28.4
Total (MMBbl) Gasoline (12) 89.4 88.7 Diesel 29.0 29.5 Jet Fuel
25.7 25.1 Total Refined Product Volumes 144.1 143.3
NGLs (MMBbl) (14) 9.6 9.4 Crude and Condensate (MMBbl) (15) 31.3
30.9 Total Delivery Volumes (MMBbl) 185.0 183.6
Ethanol (MMBbl) (16) 9.9 10.1 Trans Mountain (MMBbls -
mainline throughput) 27.6 28.6 (1) Includes Texas
Intrastates, Copano South Texas, KMNTP, Monterrey, TransColorado,
MEP, KMLA, FEP, TGP, EPNG, CIG, WIC, Cheyenne Plains, SNG, Elba
Express, Ruby, Sierrita, NGPL, and Citrus pipeline volumes. Joint
Venture throughput reported at KMI share. (2) Volumes for acquired
pipelines are included for all periods. (3) Includes Texas
Intrastates and KMNTP. (4) Includes Copano Oklahoma, Copano South
Texas, Eagle Ford Gathering, Copano, North Texas, Altamont,
KinderHawk, Camino Real, Endeavor, Bighorn, Webb/Duval Gatherers,
Fort Union, EagleHawk, Red Cedar, and Hiland Midstream throughput.
Joint Venture throughput reported at KMI share. (5) Includes Hiland
Midstream, EagleHawk, and Camino Real. Joint Venture throughput
reported at KMI share. (6) Includes McElmo Dome and Doe Canyon
sales volumes. (7) Represents 100% production from the field. (8)
Represents KMI's net share of the production from the field. (9)
Net to KMI. (10) Includes all KMI crude oil properties. (11)
Includes KMI's share of Joint Venture tonnage. (12) Gasoline
volumes include ethanol pipeline volumes. (13) Plantation reported
at KMI share. (14) Includes Cochin and Cypress (KMI share). (15)
Includes KMCC, Double Eagle (KMI share), and Double H. (16) Total
ethanol handled including pipeline volumes included in gasoline
volumes above.
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Balance
Sheets
(Unaudited)
(In millions)
March 31, December 31,
2017 2016 ASSETS Cash and cash equivalents $
396 $ 684 Other current assets 2,279 2,545 Property, plant and
equipment, net 39,023 38,705 Investments 7,136 7,027 Goodwill
22,154 22,152 Deferred charges and other assets 8,805 9,192
TOTAL ASSETS $ 79,793 $
80,305 LIABILITIES AND SHAREHOLDERS’
EQUITY Liabilities Short-term debt $ 3,928 $
2,696 Other current liabilities 2,761 3,228 Long-term debt 34,285
36,105 Preferred interest in general partner of KMP 100 100 Debt
fair value adjustments 1,079 1,149 Other 2,635 2,225
Total liabilities 44,788 45,503
Shareholders’ Equity Other shareholders’ equity 35,238
35,092 Accumulated other comprehensive loss (593 ) (661 ) Total KMI
equity 34,645 34,431 Noncontrolling interests 360 371
Total shareholders’ equity 35,005 34,802
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY $ 79,793
$ 80,305 Net Debt (1)
$ 37,843 $ 38,160
Adjusted EBITDATwelve Months
Ended
March 31, December 31, Reconciliation of Net
Income to Adjusted EBITDA (2) 2017 2016 Net
income $ 852 $ 721 Total certain items 770 933 Net income
attributable to noncontrolling interests before certain items (21 )
(21 ) DD&A and amortization of excess investments 2,635 2,617
Book taxes 976 993 Interest, net 1,969 2,002
Adjusted EBITDA $ 7,181 $
7,245 Net Debt to Adjusted EBITDA
5.3 5.3
Notes
(1)
Amounts exclude: (i) the preferred interest in general partner of
KMP, (ii) debt fair value adjustments and (iii) the foreign
exchange impact on our Euro denominated debt of $(26) million and
$(43) million as of March 31, 2017 and December 31, 2016,
respectively, as we have entered into swaps to convert that debt to
US$.
(2)
Adjusted EBITDA is net income before certain items, less net income
attributable to noncontrolling interests before certain items, plus
DD&A (including KMI's share of certain equity investees'
DD&A), book taxes (including KMI’s share of certain equity
investees’ book tax), and interest expense (before certain items),
with any difference due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170419006146/en/
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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