KMI Closes on Sale of U.S. Portion of Cochin
and Its 70 Percent Interest in KML
Proceeds Being Used to Pay Down Debt,
Creating $1.2 Billion of Balance Sheet Flexibility
Kinder Morgan, Inc. (NYSE: KMI) today announced results for the
fourth quarter of 2019:
- 14 percent year-over-year growth in natural gas transport
volumes in the fourth quarter, the eighth consecutive quarter to
exceed 10 percent growth
- $610 million or $0.27 per share of net income available to
common stockholders
- $1.35 billion or $0.59 per share of distributable cash flow
(DCF)
- $785 million of excess DCF above declared dividend
- Full-year 2019 Adjusted EBITDA up 1 percent versus 2018 despite
Trans Mountain sale
- Sale of the U.S. portion of the Cochin pipeline and 70 percent
interest in Kinder Morgan Canada Limited (KML) to Pembina Pipeline
Corporation (Pembina)
KMI’s board of directors approved a cash dividend of $0.25 per
share for the fourth quarter ($1.00 annualized), payable on
February 18, 2020, to common stockholders of record as of the close
of business on February 3, 2020. KMI is reporting fourth quarter
net income available to common stockholders of $610 million,
compared to $483 million in the fourth quarter of 2018; and DCF of
$1,354 million, a 6 percent increase over the fourth quarter of
2018.
“The dividend we announce today represents a 25 percent increase
over the fourth quarter 2018 dividend, as we continue to deliver on
the dividend growth plan we outlined in mid-2017,” said Richard D.
Kinder, Executive Chairman. “I am very bullish on our company’s
future. As our performance continues to indicate, the need for our
assets and services has a decades-long runway. Our business
segments are extremely well-positioned across our various
markets.”
“Our company had another strong quarter with earnings from our
base business augmented by the two major projects placed in service
during the third and fourth quarters of 2019, Gulf Coast Express
Pipeline (GCX) and the Elba Liquefaction project,” said Chief
Executive Officer Steve Kean. “We also received several approvals
from the Federal Energy Regulatory Commission (FERC) for important
natural gas projects and are executing on high-return expansion
projects in each of our business units.
“We maintained our commitment to fiscal discipline by funding
growth capital through operating cash flows, as we have been doing
since the first quarter of 2016. Demonstrating this commitment is
the fact that during the year we reduced our capital expenditures
by more than $300 million, which overwhelmed the slight miss on
DCF. The sale of our U.S. Cochin asset, along with our 70 percent
interest in KML, both at attractive valuations, helped us further
strengthen our balance sheet. In fact, our net debt declined by
almost $2.2 billion in the quarter and has now declined by more
than $9.4 billion since the third quarter of 2015,” concluded
Kean.
“Our Natural Gas Pipelines and Product Pipelines segments
generated strong commercial and financial performance in the fourth
quarter,” said KMI President Kim Dang. “Company-wide we generated
fourth quarter earnings per common share of $0.27, compared to
$0.21 in the fourth quarter of 2018. Adjusted Earnings per share in
the fourth quarter of 2019 were up 4 percent compared to the fourth
quarter of 2018. At $0.59 per common share, DCF per share was up
$0.03 from the fourth quarter of 2018, with $785 million of excess
DCF above our declared dividend. In an improvement from our third
quarter forecast, DCF ended the year essentially on plan at less
than one-half of one percent below plan.
“KMI reported fourth quarter net income available to common
stockholders of $610 million, compared to $483 million for the
fourth quarter of 2018, and DCF of $1,354 million, up from $1,273
million for the comparable period in 2018. The net income and DCF
increases were due to greater contributions from the Natural Gas
Pipelines and Products Pipelines segments, partially offset by
lower commodity prices and volumes impacting our CO2 segment. Net
income was further impacted by a $1,296 million non-cash gain
associated with the KML/Cochin sale as well as $1,014 million in
non-cash impairments taken in the fourth quarter of 2019. These
included an impairment of our investment in Ruby Pipeline driven by
upcoming contract expirations and competing natural gas supplies,
as well as of two of our gathering and processing assets in
Oklahoma and North Texas driven by reduced drilling activity.
“We also made excellent progress on our Permian Highway Pipeline
project, with nearly all of the right-of-way secured along the
route and construction activities well underway on the western
spread. As previously announced, given the slower than anticipated
pace of regulatory approvals, the project is now expected to be in
service early in 2021. As with GCX, this project is critical to the
development of resources and the reduction of flaring in the
Permian Basin,” continued Dang.
KMI’s project backlog at the end of the fourth quarter stood at
$3.6 billion, approximately $500 million less than at the end of
the third quarter of 2019. Excluding the CO2 segment projects
(where we have higher return thresholds than our other projects),
KMI expects projects in its backlog to generate an average Project
EBITDA multiple of approximately 5.7 times.
For the full year of 2019, KMI reported net income available to
common stockholders of $2,190 million, compared to $1,481 million
in 2018, and DCF of $4,993 million, up 6 percent from $4,730
million in 2018. Net income and DCF for the full year improved
year-over-year due to greater contributions from the Natural Gas
Pipelines segment, lower preferred dividend payments and lower
interest expense, partially offset by reduced contributions from
the CO2 segment and the Trans Mountain sale. Net income was further
impacted by non-cash impairments taken during 2018.
2020 Outlook
For 2020, KMI’s budget contemplates declared dividends of $1.25
per common share, a 25 percent increase from the 2019 declared
dividends, DCF of approximately $5.1 billion ($2.24 per common
share) and Adjusted EBITDA of approximately $7.6 billion. KMI also
expects to invest $2.4 billion in expansion projects and
contributions to joint ventures during 2020. KMI expects to use
internally generated cash flow to fully fund its 2020 dividend
payments, as well as almost all of its 2020 discretionary spending,
with no need to access equity markets. KMI also expects to end 2020
with a Net Debt-to-Adjusted EBITDA ratio of approximately 4.3
times. More detail will be provided at our Investor Day on January
29, 2020.
KMI does not provide budgeted net income available to common
stockholders and net income, the GAAP financial measures most
directly comparable to the non-GAAP financial measures of DCF and
Adjusted EBITDA, respectively, or budgeted metrics derived
therefrom (such as the portion of net income attributable to an
individual capital project, the GAAP financial measure most
directly comparable to Project EBITDA) due to the impracticality of
predicting certain amounts required by GAAP such as unrealized
gains and losses on derivatives marked to market and potential
changes in estimates for certain contingent liabilities.
Overview of Business
Segments
“The Natural Gas Pipelines segment’s financial
performance for the fourth quarter of 2019 was higher relative to
the fourth quarter of 2018,” said Dang. “The segment saw higher
revenue due to contributions from the Elba Liquefaction and GCX
projects and various expansion projects placed in service on
Tennessee Gas Pipeline (TGP).”
Natural gas transport volumes were up 14 percent compared to the
fourth quarter of 2018, with the largest gains on El Paso Natural
Gas (EPNG), TGP and Colorado Interstate Gas (CIG), followed by
Kinder Morgan Louisiana Pipeline (KMLP), GCX and the Texas
Intrastates. This constitutes the eighth quarter in a row in which
volumes exceeded the previous comparable prior year period by 10
percent or more. EPNG benefited from Permian-related activity and
colder California weather, TGP from new projects placed in service,
CIG from increased DJ production and higher heating demand on the
Front Range, KMLP from the Sabine Pass Expansion in-service, GCX
from going into service, and the Texas Intrastates from the
continued growth in the Texas Gulf Coast market. Natural gas
gathering volumes were up 8 percent from the fourth quarter of 2018
due primarily to higher volumes on the South Texas, Eagle Ford and
Bakken midstream systems. NGL transport volumes were up 23 percent
compared to the fourth quarter of 2018, due to higher Cochin
volumes.
Natural gas is critical to the American economy, to meeting the
world’s evolving energy needs, and to cost-effectively achieving
greenhouse gas emissions reductions. Independent analysts project
that U.S. natural gas demand, including net exports to Mexico and
LNG exports -- displacing more carbon-intensive fuels -- will
increase from 2019 levels by nearly 30 percent to more than 120
billion cubic feet per day (Bcf/d) by 2030, which is consistent
with KMI’s own internal modeling. Of the natural gas consumed in or
exported from the U.S., about 40 percent moves on KMI pipelines.
Analysts project that future natural gas infrastructure
opportunities through 2030 will be driven by LNG exports (forecast
to increase more than three-fold), continued industrial development
(forecast to rise by 4 Bcf/d), particularly in the petrochemical
industry, net exports to Mexico (forecast to rise by 3 Bcf/d), and
greater demand for gas-fired power generation across the country
(forecast to increase by 2 Bcf/d).
“During the quarter, the Products Pipelines segment
benefited from strong contributions from our Bakken Crude assets,
the KM Splitter, and SFPP,” Dang said.
Crude and condensate pipeline volumes and total refined product
volumes were flat compared to the fourth quarter of 2018.
“Terminals segment earnings, which were impacted by the
December sale of KML, were down this quarter compared to the fourth
quarter of 2018. Our liquids business, which accounts for nearly 80
percent of the segment total, saw record volumes across our Houston
Ship Channel hub with refined products exports averaging 328,000
barrels per day for the quarter,” said Dang.
Contributions from the Terminals segment’s bulk business were
down compared to the fourth quarter of 2018 with gains at our
petroleum coke handling operations more than offset by weakness in
coal export volumes.
“The CO2 segment was negatively impacted versus the
fourth quarter of 2018 primarily by lower commodity prices and
lower crude volumes. Our weighted average NGL price for the quarter
was down $5.34 per barrel, or 19 percent from the fourth quarter of
2018. Our realized weighted average crude oil price for the quarter
was down 10 percent at $49.90 per barrel compared to $55.57 per
barrel for the fourth quarter of 2018, largely driven by our
Midland/Cushing basis hedges,” said Dang. “Fourth quarter 2019
combined oil production across all of our fields was down 5 percent
compared to the same period in 2018 on a net to KMI basis, with
declines experienced at most of our fields. Fourth quarter 2019 net
NGL sales volumes of 9.8 thousand barrels per day were up 4 percent
compared to the same period in 2018.”
Other News
Corporate
- On January 9, 2020, KMI announced the sale of all of the
approximately 25 million shares of Pembina stock it received in
connection with Pembina’s acquisition of KML. KMI is using the
after-tax proceeds from the sale of approximately $764 million to
pay down debt.
Natural Gas Pipelines
- Construction activities continue on the Permian Highway
Pipeline (PHP) near the Waha area in Texas. More than 99 percent of
the right-of-way along the entire route has been secured, and
Kinder Morgan expects to receive the required permit from the U.S.
Army Corps of Engineers soon. The approximately $2 billion project
is designed to transport up to 2.1 Bcf/d of natural gas through
approximately 430 miles of 42-inch pipeline from the Waha area to
U.S. Gulf Coast and Mexico markets. PHP is expected to be in
service early in 2021. The total 2.1 Bcf/d of capacity is fully
subscribed under long-term, binding agreements. Kinder Morgan Texas
Pipeline (KMTP), EagleClaw Midstream and Altus Midstream each hold
an ownership interest of approximately 26.7 percent, and an
affiliate of an anchor shipper has a 20 percent interest. KMTP is
building and will operate the pipeline.
- The Elba Liquefaction Company (ELC) is continuing the
commissioning and startup of the ten liquefaction units that
comprise its portion of the Elba Liquefaction project. Three units
were placed in service in 2019, and a fourth unit went in service
in January. The remaining six units are scheduled to be placed in
service during the first half of 2020. The facility will have a
total liquefaction capacity of approximately 2.5 million tonnes per
year of LNG, equivalent to approximately 350 million cubic feet per
day (MMcf/d) of natural gas. The nearly $2 billion project is
supported by long term contracts with Shell. ELC, a KMI joint
venture with EIG Global Energy Partners as a 49 percent partner,
owns the liquefaction units and other ancillary equipment. Other
facilities associated with the project are 100 percent owned by
KMI.
- Construction activities are underway for projects across KMI’s
Texas intrastate system, including the Dayton Loop Project that is
on schedule to be placed in service in the first quarter of 2020.
This project will provide incremental takeaway capacity from the
east Texas and Goodrich areas to the Houston Ship Channel, Texas
City and Katy market areas. KMI is investing more than $325 million
in a collection of projects, including the Dayton Loop Project,
designed to increase capacity by approximately 1.7 Bcf/d and
improve connectivity across its Texas intrastate system. The
additional projects are designed to support the distribution of
significant incremental volumes as GCX, PHP and other new Permian
Basin takeaway projects deliver into the U.S. Gulf Coast and Mexico
markets.
- Construction is complete on a new 150 MMcf/d cryogenic plant in
McKenzie County, North Dakota that was placed in service November
1, 2019. Approximately 275 MMcf/d of gathering capacity is also
being created through pipeline and compression additions in the
area. These projects are part of KMI’s approximately $450 million
investment to expand its existing natural gas gathering and
processing footprint in the Williston Basin.
- On November 21, 2019, FERC issued a certificate authorizing
EPNG to construct the South Mainline Expansion Project.
Construction on the approximately $140 million project began in
early December. The project will increase EPNG’s South Mainline
system by approximately 203,000 dekatherms per day (Dth/d) by
modifying and expanding portions of the system in Texas, New Mexico
and Arizona to meet increased demand for natural gas from Arizona
electric utility providers and for affordable, U.S.-produced
natural gas exports to Mexico. The project will also provide for
incremental delivery capacity into California and is expected to be
placed into service in the third quarter of 2020.
- Construction is nearly complete on the approximately $56
million Sierrita Gas Pipeline Expansion Project (KMI share:
approximately $20 million). This project will increase the
pipeline’s capacity by approximately 323,000 Dth/d to 524,000
Dth/d, and consists of a new 15,900 horsepower compressor station
in Pima County, Arizona. This project is expected to be placed into
service in the second quarter of 2020. KMI is a 35 percent owner
and the operator of Sierrita Gas Pipeline.
- On October 23, 2019, FERC issued Natural Gas Pipeline of
America (NGPL) an environmental assessment for its proposed Gulf
Coast southbound expansion project. The approximately $230 million
project (KMI’s share: $115 million) will increase southbound
capacity on NGPL’s Gulf Coast System by approximately 300,000 Dth/d
to serve Corpus Christi Liquefaction, LLC. The project is supported
by a long-term take-or-pay contract and is expected to be placed
into service in the first half of 2021 pending regulatory
approvals.
- Construction is underway on the Sabine Pass Compression
Project, which is expected to be placed in service in late 2020.
The approximately $68 million project (KMI’s share: approximately
$34 million), supported by a long-term take-or-pay contract, will
add compression capacity on NGPL’s Louisiana system in order to
deliver additional natural gas to the Sabine Pass Liquefaction
facility in Cameron Parish.
- On October 17, 2019, FERC issued a certificate authorizing NGPL
to construct its approximately $52 million Lockridge to Waha
Project (KMI’s share: $26 million). The project will enable NGPL to
deliver up to 500,000 Dth/d to the Waha Hub with an extension of
its Amarillo system, and is supported by long-term take-or-pay
contracts. Construction is expected to begin in May 2020, and the
extension is expected to be placed in service in the fourth quarter
of 2020.
Products Pipelines
- Progress continues on the Roanoke Expansion Project on the
Plantation Pipe Line system, and it is currently on track to be in
service by April 1, 2020. Currently, the incremental capacity of
21,000 barrels per day (bpd) is available on the mainline from
Baton Rouge, Louisiana to Greensboro, South Carolina. The full
project (KMI’s share: approximately $25 million) will add
approximately 21,000 bpd of incremental refined petroleum products
capacity on the Plantation Pipe Line system from the Baton Rouge,
Louisiana and Collins, Mississippi origin points to the Roanoke,
Virginia area. The project consists primarily of additional pump
capacity and operational storage.
Terminals
- Construction activities have begun on a series of projects at
Kinder Morgan’s Pasadena Terminal and Jefferson Street Truck Rack,
located on the Houston Ship Channel. These approximately $125
million projects include increasing flow rates on inbound pipeline
connections and outbound dock lines, tank modifications that will
add butane blending and vapor combustion capabilities to 10 storage
tanks, expansion of the current methyl tert-butyl ether storage and
blending platform, and a new dedicated natural gasoline (C5)
inbound connection. The improvements are supported by a long-term
agreement with a major refiner and are expected to be completed by
the end of the second quarter of 2020.
- Construction activities have begun for the butane-on-demand
blending system for 25 tanks at KMI’s Galena Park Terminal. The
approximately $45 million project will include construction of a
30,000-barrel butane sphere and a new inbound C4 pipeline
connection, as well as tank and piping modifications to extend
butane blending capabilities to 25 tanks, two ship docks, and six
cross-channel pipelines. The project is supported by a long-term
agreement with an investment grade midstream company and is
expected to be completed in the first quarter of 2021.
- KMI has begun construction on an expansion of its
market-leading Argo ethanol hub. The project, which spans both the
Argo and Chicago Liquids facilities, includes 105,000 barrels of
additional ethanol storage capacity and enhancements to the
system’s rail loading, rail unloading and barge loading
capabilities. The approximately $19 million project will improve
the system’s inbound and outbound modal balances, adding greater
product-clearing efficiencies to this industry-critical pricing and
liquidity hub.
- Battleground Oil Specialty Terminal Company LLC (BOSTCO), a
leading fuel oil storage terminal on the Houston Ship Channel, has
authorized a facility upgrade that will add piping to allow for
segregation of high sulfur and low sulfur fuel oils. Detailed
engineering and design work is underway on the approximately $22
million project, which is expected to be placed in-service in the
fourth quarter of 2020. KMI owns a 55 percent interest in and is
the operator of BOSTCO.
CO2
- CO2 segment capital projects continue to generate attractive
returns, consistent with past performance. We expect to continue to
find opportunities to extend the productive life of our fields by
virtue of our repeated past success in converting the substantial
amount of original resources into productive oil and NGLs.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy
infrastructure companies in North America. Our mission is to
provide energy transportation and storage services in a safe,
efficient and environmentally responsible manner for the benefit of
people, communities and businesses. Our vision is delivering energy
to improve lives and create a better world. We own an interest in
or operate approximately 83,000 miles of pipelines and 147
terminals. Our pipelines transport natural gas, refined petroleum
products, crude oil, condensate, CO2 and other products, and our
terminals transload and store liquid commodities including
petroleum products, ethanol and chemicals, and bulk products,
including petroleum coke, metals and ores. For more information,
please visit www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. Eastern Time on
Wednesday, January 22, at www.kindermorgan.com for a LIVE webcast conference
call on the company’s fourth quarter earnings.
Non-GAAP Financial
Measures
The non-generally accepted accounting principles (non-GAAP)
financial measures of Adjusted Earnings and distributable cash flow
(DCF), both in the aggregate and per share for each; segment
earnings before depreciation, depletion, amortization (DD&A)
and amortization of excess cost of equity investments and Certain
Items (Adjusted Segment EBDA); net income before interest expense,
income taxes, DD&A and Certain Items (Adjusted EBITDA); Net
Debt; Adjusted Net Debt; Project EBITDA; and Free Cash Flow in
relation to our CO2 segment are presented herein.
Our non-GAAP measures described further below should not be
considered alternatives to GAAP net income or other GAAP measures
and have important limitations as analytical tools. Our
computations of these non-GAAP measures 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. Management compensates for the
limitations of these non-GAAP financial 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.
Certain Items, as adjustments used
to calculate our non-GAAP measures, 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, enactment of new tax
legislation and casualty losses). (See the accompanying Tables 4
and 7.)
Adjusted Earnings is calculated by
adjusting net income available to common stockholders for Certain
Items. Adjusted Earnings is used by us and certain external users
of our financial statements to assess the earnings of our business
excluding Certain Items as another reflection of the Company’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
basic earnings per common share. (See the accompanying Tables 1 and
2.)
DCF is calculated by adjusting net
income available to common stockholders for Certain Items (Adjusted
Earnings), and further by DD&A and amortization of excess cost
of equity investments, income tax expense, cash taxes, sustaining
capital expenditures and other items. DCF is a significant
performance measure useful to management and external users of our
financial statements in evaluating our performance and in measuring
and estimating the ability of our assets to generate cash earnings
after servicing our debt, 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. DCF should not be used as
an alternative to net cash provided by operating activities
computed under GAAP. We believe the GAAP measure most directly
comparable to DCF is net income available to common stockholders.
DCF per common share is DCF divided by average outstanding common
shares, including restricted stock awards that participate in
common dividends. (See the accompanying Tables 2 and 3.)
Adjusted Segment EBDA is calculated
by adjusting segment earnings before DD&A and amortization of
excess cost of equity investments (Segment EBDA) for Certain Items
attributable to the segment. Adjusted Segment EBDA is used by
management in its analysis of segment performance and management of
our business. General and administrative expenses and certain
corporate charges 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 Adjusted
Segment EBDA is a useful performance metric because it provides
management 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 Adjusted Segment EBDA is Segment EBDA. (See the accompanying
Tables 3 and 7.)
Adjusted EBITDA is calculated by
adjusting net income before interest expense, income taxes, and
DD&A, including amortization of excess cost of equity
investments (EBITDA) for Certain Items, KMI’s share of
unconsolidated joint venture (JV) DD&A and income tax expense
(net of our partners’ share of consolidating JV DD&A and income
tax expense), and net income attributable to noncontrolling
interests that is further adjusted for KML noncontrolling interests
(net of its applicable Certain Items). Adjusted EBITDA is used by
management and external users, in conjunction with our Net Debt (as
described further below), 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. (See the accompanying Tables 3 and 4.)
Net Debt and Adjusted Net Debt, as used in this news release,
are non-GAAP financial measures that management believes are useful
to investors and other users of our financial information in
evaluating our leverage. Net Debt is calculated by subtracting from
debt (i) cash and cash equivalents, (ii) the preferred interest in
the general partner of Kinder Morgan Energy Partners L.P., (iii)
debt fair value adjustments, (iv) the foreign exchange impact on
Euro-denominated bonds for which we have entered into currency
swaps and (v) 50% of the outstanding KML preferred equity. Adjusted
Net Debt is Net Debt with the cash component as of December 31,
2018, reduced by the amount of cash distributed to KML’s restricted
voting shareholders as a return of capital on January 3, 2019, and
increased by the net of the gain realized on settlement of net
investment hedges of our foreign currency risk with respect to our
share of the KML return of capital on January 3, 2019. We believe
the most comparable measure to Net Debt and Adjusted Net Debt is
debt net of cash and cash equivalents as reconciled in the notes to
the accompanying Preliminary Consolidated Balance Sheets in Table
6.
Project EBITDA, as used in this
news release, is calculated for an individual capital project as
earnings before interest expense, taxes, DD&A and general and
administrative expenses attributable to such project, or for JV
projects, our percentage share of the foregoing. Management uses
Project EBITDA to evaluate our return on investment for capital
projects before expenses that are generally not controllable by
operating managers in our business segments. We believe the GAAP
measure most directly comparable to Project EBITDA is the portion
of net income attributable to a capital project.
Free Cash Flow, as used in relation
to our CO2 segment, is calculated by reducing Segment EBDA (GAAP)
by Certain Items and capital expenditures (sustaining and
expansion). Management uses Free Cash Flow as an additional
performance measure for our CO2 segment. We believe the GAAP
measure most directly comparable to Free Cash Flow is Segment EBDA
(GAAP). (See the accompanying Table 7).
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 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 in this news release include,
among others, express or implied statements pertaining to: the
long-term demand for KMI’s assets and services; KMI's expected DCF
and Adjusted EBITDA for 2020 and expected Net Debt-to-Adjusted
EBITDA ratio at the end of 2020; anticipated dividends; and KMI's
capital projects, including expected completion timing and benefits
of those projects. 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 as to
when or if any such forward-looking statements will materialize nor
their ultimate impact on our operations or financial condition.
Important factors that could cause actual results to differ
materially from those expressed in or implied by 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, 2018 (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.
Table 1
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Consolidated
Statements of Income
(Unaudited, in millions except
per share amounts)
Three Months Ended December
31,
% change
Year Ended December
31,
% change
2019
2018
2019
2018
Revenues
$
3,352
$
3,781
$
13,209
$
14,144
Operating costs, expenses and other
Costs of sales
776
1,199
3,263
4,421
Operations and maintenance
679
640
2,591
2,522
Depreciation, depletion and
amortization
661
587
2,411
2,297
General and administrative
134
110
590
601
Taxes, other than income taxes
102
86
426
345
(Gain) loss on divestitures and
impairments, net
(929
)
102
(942
)
167
Other income, net
(2
)
(1
)
(3
)
(3
)
Total operating costs, expenses and
other
1,421
2,723
8,336
10,350
Operating income
1,931
1,058
4,873
3,794
Other income (expense)
(Loss) earnings from equity
investments
(425
)
179
101
617
Amortization of excess cost of equity
investments
(22
)
(18
)
(83
)
(95
)
Interest, net
(442
)
(461
)
(1,801
)
(1,917
)
Other, net
40
17
75
107
Income before income taxes
1,082
775
3,165
2,506
Income tax expense
(455
)
(273
)
(926
)
(587
)
Net income
627
502
2,239
1,919
Net income attributable to NCI
(17
)
(8
)
(49
)
(310
)
Net income attributable to Kinder Morgan,
Inc.
610
494
2,190
1,609
Preferred stock dividends
—
(11
)
—
(128
)
Net income available to common
stockholders
$
610
$
483
26
%
$
2,190
$
1,481
48
%
Class P Shares
Basic and diluted earnings per common
share
$
0.27
$
0.21
29
%
$
0.96
$
0.66
45
%
Basic and diluted weighted average common
shares outstanding
2,265
2,248
1
%
2,264
2,216
2
%
Declared dividends per common share
$
0.25
$
0.20
25
%
$
1.00
$
0.80
25
%
Adjusted Earnings (1)
$
589
$
565
4
%
$
2,161
$
1,982
9
%
Adjusted Earnings per common share (1)
$
0.26
$
0.25
4
%
$
0.95
$
0.89
7
%
Note
(1)
Adjusted Earnings is Net income
available to common stockholders adjusted for Certain Items, see
Table 2. Adjusted Earnings per common share uses Adjusted Earnings
and applies the same two-class method used in arriving at basic
earnings per common share.
Table 2
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Net Income
Available to Common Stockholders to Adjusted Earnings and DCF
Reconciliation
(Unaudited, in
millions)
Three Months Ended December
31,
% change
Year Ended December
31,
% change
2019
2018
2019
2018
Net income available to common
stockholders (GAAP)
$
610
$
483
$
2,190
$
1,481
Total Certain Items
(21
)
82
(29
)
501
Adjusted Earnings (1)
589
565
4
%
2,161
1,982
9
%
DD&A and amortization of excess cost
of equity investments for DCF (2)
774
696
2,867
2,752
Income tax expense for DCF (1)(2)
193
198
714
710
Cash taxes (3)
(14
)
(17
)
(90
)
(77
)
Sustaining capital expenditures (3)
(211
)
(181
)
(688
)
(652
)
Other items (4)
23
12
29
15
DCF
$
1,354
$
1,273
6
%
$
4,993
$
4,730
6
%
Table 3
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Adjusted Segment
EBDA, Adjusted EBITDA and DCF
(Unaudited, in millions,
except per share amounts)
Three Months Ended December
31,
% change
Year Ended December
31,
% change
2019
2018
2019
2018
Natural Gas Pipelines
$
1,248
$
1,128
11
%
$
4,610
$
4,205
10
%
Products Pipelines
322
297
8
%
1,258
1,227
3
%
Terminals
290
304
(5
)%
1,174
1,209
(3
)%
CO2
185
216
(14
)%
707
907
(22
)%
Kinder Morgan Canada
—
—
n/a
—
124
(100
)%
Adjusted Segment EBDA (1)(5)
2,045
1,945
5
%
7,749
7,672
1
%
General and administrative and corporate
charges (1)
(131
)
(97
)
(598
)
(564
)
KMI's share of JV DD&A and income tax
expense (1)(6)
119
117
487
472
Net income attributable to NCI (net of KML
NCI and Certain Items) (1)
(13
)
(3
)
(20
)
(12
)
Adjusted EBITDA
2,020
1,962
3
%
7,618
7,568
1
%
Interest, net (1)
(451
)
(469
)
(1,816
)
(1,891
)
Cash taxes (3)
(14
)
(17
)
(90
)
(77
)
Sustaining capital expenditures (3)
(211
)
(181
)
(688
)
(652
)
KML NCI DCF adjustments (7)
(13
)
(23
)
(60
)
(105
)
Preferred stock dividends
—
(11
)
—
(128
)
Other items (4)
23
12
29
15
DCF
$
1,354
$
1,273
6
%
$
4,993
$
4,730
6
%
Weighted average common shares outstanding
for dividends (8)
2,277
2,261
2,276
2,228
DCF per common share
$
0.59
$
0.56
$
2.19
$
2.12
Declared dividends per common share
$
0.25
$
0.20
$
1.00
$
0.80
Notes
(1)
Amounts are adjusted for Certain Items.
See Tables 4 and 7 for more information.
(2)
Includes KMI's share of DD&A or income
tax expense from JVs, net of DD&A or income tax expense
attributable to KML NCI, as applicable.
(3)
Includes KMI's share of cash taxes or
sustaining capital expenditures from JVs, as applicable.
(4)
Includes non-cash pension expense and
non-cash compensation associated with our restricted stock
program.
(5)
For segment reporting purposes, effective
January 1, 2019, certain assets were transferred between our
business segments. As a result, three and twelve months ended
December 31, 2018 amounts have been reclassified to conform to the
current presentation. The reclassified amounts were not
material.
(6)
KMI's share of unconsolidated JV DD&A
and income tax expense, net of consolidating JV partners' share of
DD&A.
(7)
The combined net income, DD&A and
income tax expense adjusted for Certain Items, as applicable,
attributable to KML NCI. See Table 7.
(8)
Includes restricted stock awards that
participate in common share dividends.
Table 4
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Net Income to
Adjusted EBITDA Reconciliation
(Unaudited, in
millions)
Three Months Ended December
31,
% change
Year Ended
December 31,
% change
2019
2018
2019
2018
Net income (GAAP)
$
627
$
502
25
%
$
2,239
$
1,919
17
%
Certain Items:
Fair value amortization
(7
)
(7
)
(29
)
(34
)
Legal, environmental and taxes other than
income tax reserves
18
10
46
12
Change in fair market value of derivative
contracts (1)
(2
)
(110
)
(24
)
80
(Gain) loss on divestitures and
impairments, net (2)
(275
)
109
(280
)
317
Hurricane damage (recoveries), net
—
1
—
(24
)
Income tax Certain Items
284
91
299
(58
)
NCI associated with Certain Items
(3
)
(8
)
(4
)
240
Other
(36
)
(4
)
(37
)
(32
)
Total Certain Items
(21
)
82
(29
)
501
DD&A and amortization of excess cost
of equity investments
683
605
2,494
2,392
Income tax expense (3)
171
182
627
645
KMI's share of JV DD&A and income tax
expense (3)(4)
119
117
487
472
Interest, net (3)
451
469
1,816
1,891
Net (income) loss attributable to NCI (net
of KML NCI (3))
(10
)
5
(16
)
(252
)
Adjusted EBITDA
$
2,020
$
1,962
3
%
$
7,618
$
7,568
1
%
Notes
(1)
Gains or losses are reflected in
our DCF when realized.
(2)
Three months and year ended
December 31, 2019 primarily include: (i) a $1,296 million pre-tax
gain on the sale of KML and U.S. Cochin Pipeline and a pre-tax loss
of $364 million for asset impairments, related to gathering and
processing assets in Oklahoma and northern Texas in our Natural Gas
Pipelines business segment and oil and gas producing assets in our
CO2 business segment, which are reported within “(Gain) loss on
divestitures and impairments, net” on the accompanying Preliminary
Consolidated Statement of Income; and (ii) a pre-tax $650 million
loss for an impairment of our investment in Ruby Pipeline which is
reported within “(Loss) earnings from equity investments” on the
accompanying Preliminary Consolidated Statement of Income. (See
Table 1.)
(3)
Amounts are adjusted for Certain
Items. See Table 7 for more information.
(4)
KMI's share of unconsolidated JV
DD&A and income tax expense, net of consolidating JV partners'
share of DD&A.
Table 5
Volume and CO2 Segment Hedges
Highlights
(Historical pro forma for
acquired and divested assets, JV volumes at KMI share)
Three Months Ended December
31,
Year Ended December
31,
2019
2018
2019
2018
Natural Gas Pipelines
Transport volumes (BBtu/d)
39,272
34,551
36,793
32,821
Sales volumes (BBtu/d)
2,374
2,339
2,420
2,472
Gas gathering volumes (BBtu/d)
3,521
3,256
3,382
2,972
NGLs (MBbl/d) (1)
124
101
125
114
Products Pipelines (MBbl/d)
Gasoline (2)
1,029
1,024
1,041
1,038
Diesel fuel
363
376
368
372
Jet fuel
311
303
306
302
Total refined product volumes
1,703
1,703
1,715
1,712
Crude and condensate (3)
671
672
651
631
Total delivery volumes (MBbl/d)
2,374
2,375
2,366
2,343
Terminals
Liquids leasable capacity (MMBbl)
89.0
88.8
89.0
88.8
Liquids utilization %
94.0
%
94.9
%
94.0
%
94.9
%
Bulk transload tonnage (MMtons)
14.3
16.5
59.4
64.2
CO2
SACROC oil production
23.50
24.77
23.90
24.39
Yates oil production
7.48
7.09
7.19
7.43
Katz and Goldsmith oil production
3.60
4.12
3.79
4.59
Tall Cotton oil production
2.25
2.65
2.33
2.36
Total oil production - net (MBbl/d)
(4)
36.83
38.63
37.21
38.77
NGL sales volumes - net (MBbl/d) (4)
9.79
9.38
10.10
10.01
CO2 production - net (Bcf/d)
0.60
0.60
0.61
0.57
Realized weighted average oil price per
Bbl
$
49.90
$
55.57
$
49.49
$
57.83
Realized weighted average NGL price per
Bbl
$
23.34
$
28.68
$
23.49
$
32.21
CO2 Segment Hedges
2020
2021
2022
2023
Crude Oil (5)
Price ($/barrel)
$
56.58
$
54.21
$
54.60
$
52.81
Volume (barrels per day)
29,900
16,100
7,700
4,000
NGLs
Price ($/barrel)
$
31.97
Volume (barrels per day)
4,544
Midland-to-Cushing Basis Spread
Price ($/barrel)
$
0.14
Volume (barrels per day)
31,100
Notes
(1)
All periods reflect January 1,
2019 transfer of certain assets and include Cochin, Utopia, and
Cypress.
(2)
Gasoline volumes include ethanol
pipeline volumes.
(3)
All periods reflect January 1,
2019 transfer of certain assets and include KMCC, Camino Real
Crude, Double Eagle, Hiland Crude Gathering, and Double H.
(4)
Net of royalties and outside
working interests.
(5)
Includes West Texas Intermediate
hedges.
Table 6
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Consolidated
Balance Sheets
(Unaudited, in
millions)
December 31,
December 31,
2019
2018
Assets
Cash and cash equivalents
$
185
$
3,280
Other current assets
3,053
2,442
Property, plant and equipment, net
36,419
37,897
Investments
7,759
7,481
Goodwill
21,451
21,965
Deferred charges and other assets
5,290
5,801
Total assets
$
74,157
$
78,866
Liabilities, Redeemable Noncontrolling
Interest and Shareholders' Equity
Short-term debt
$
2,377
$
3,388
Other current liabilities
2,623
4,169
Preferred interest in general partner of
KMP
100
100
Long-term debt
30,883
33,105
Debt fair value adjustments
1,032
731
Other
2,253
2,176
Total liabilities
39,268
43,669
Redeemable Noncontrolling Interest
803
666
Other shareholders' equity
34,075
34,008
Accumulated other comprehensive loss
(333
)
(330
)
KMI equity
33,742
33,678
Noncontrolling interests
344
853
Total shareholders' equity
34,086
34,531
Total liabilities, redeemable
noncontrolling interest and shareholders' equity
$
74,157
$
78,866
Net Debt (1)
$
33,031
$
33,352
Adjusted Net Debt (2)
33,031
34,151
Adjusted EBITDA Twelve Months
Ended
December 31,
December 31,
Reconciliation of Net Income to
Adjusted EBITDA
2019
2018
Net income (GAAP)
$
2,239
$
1,919
Total Certain Items
(29
)
501
Net income attributable to NCI (net of KML
NCI) (3)
(16
)
(252
)
DD&A and amortization of excess cost
of equity investments
2,494
2,392
Income tax expense (4)
627
645
KMI's share of JV DD&A and income tax
expense (4)
487
472
Interest, net (4)
1,816
1,891
Adjusted EBITDA
$
7,618
$
7,568
Net Debt to Adjusted EBITDA
4.3
4.4
Adjusted Net Debt to Adjusted
EBITDA
4.3
4.5
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 $44 million and $76 million as of December 31,
2019 and 2018, respectively, as we have entered into swaps to
convert that debt to U.S.$. Additionally, the 2018 amount includes
50% of KML preferred equity, which is included in noncontrolling
interests, of $215 million.
(2)
In addition to the adjustments
described in (1) above, the December 31, 2018 cash component was
(i) reduced by $890 million, representing the portion of cash KML
distributed to KML restricted voting shareholders on January 3,
2019 as a return of capital and (ii) increased by $91 million,
representing the unrecognized gain as of December 31, 2018 on net
investment hedges which hedged our exposure to foreign currency
risk associated with a substantial portion of our share of the
proceeds from the sale of Trans Mountain.
(3)
2019 and 2018 amounts are net of
KML NCI of $33 million and $58 million, respectively.
(4)
Amounts are adjusted for Certain
Items.
Table 7
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Supplemental
Information
(Unaudited, in
millions)
Three Months Ended December
31,
Year Ended December
31,
2019
2018
2019
2018
Segment EBDA
Natural Gas Pipelines (GAAP)
$
1,278
$
1,172
$
4,661
$
3,540
Certain Items
(30
)
(44
)
(51
)
665
Natural Gas Pipelines Adjusted Segment
EBDA
1,248
1,128
4,610
4,205
Products Pipelines (GAAP)
317
297
1,225
1,209
Certain Items
5
—
33
18
Products Pipelines Adjusted Segment
EBDA
322
297
1,258
1,227
Terminals (GAAP)
622
303
1,506
1,175
Certain Items
(332
)
1
(332
)
34
Terminals Adjusted Segment EBDA
290
304
1,174
1,209
CO2 (GAAP)
123
198
681
759
Certain Items
62
18
26
148
CO2 Adjusted Segment EBDA
185
216
707
907
Kinder Morgan Canada (GAAP)
—
(26
)
(2
)
720
Certain Items
—
26
2
(596
)
Kinder Morgan Canada Adjusted Segment
EBDA
—
—
—
124
Total Segment EBDA (GAAP)
2,340
1,944
8,071
7,403
Total Segment EBDA Certain Items
(295
)
1
(322
)
269
Total Adjusted Segment EBDA
$
2,045
$
1,945
$
7,749
$
7,672
Depreciation, depletion and amortization
(GAAP)
$
(661
)
$
(587
)
$
(2,411
)
$
(2,297
)
Amortization of excess cost of equity
investments (GAAP)
(22
)
(18
)
(83
)
(95
)
DD&A and amortization of excess cost
of equity investments
(683
)
(605
)
(2,494
)
(2,392
)
KMI's share of JV DD&A
(95
)
(97
)
(392
)
(390
)
DD&A attributable to KML NCI
4
6
19
30
DD&A and amortization of excess cost
of equity investments for DCF
$
(774
)
$
(696
)
$
(2,867
)
$
(2,752
)
General and administrative (GAAP)
$
(134
)
$
(110
)
$
(590
)
$
(601
)
Corporate benefit (charges)
1
7
(21
)
13
Certain Items
2
6
13
24
General and administrative and corporate
charges (1)
$
(131
)
$
(97
)
$
(598
)
$
(564
)
Interest, net (GAAP)
$
(442
)
$
(461
)
$
(1,801
)
$
(1,917
)
Certain Items
(9
)
(8
)
(15
)
26
Interest, net (1)
$
(451
)
$
(469
)
$
(1,816
)
$
(1,891
)
Income tax expense (GAAP)
$
(455
)
$
(273
)
$
(926
)
$
(587
)
Certain Items
284
91
299
(58
)
Income tax expense (1)
(171
)
(182
)
(627
)
(645
)
KMI's share of taxable JV income tax
expense (1)
(24
)
(20
)
(95
)
(82
)
Income tax expense attributable to KML NCI
(1)
2
4
8
17
Income tax expense for DCF (1)
$
(193
)
$
(198
)
$
(714
)
$
(710
)
Net income attributable to KML NCI
$
(4
)
$
(6
)
$
(29
)
$
(297
)
KML NCI associated with Certain Items
(3
)
(7
)
(4
)
239
KML NCI (1)
(7
)
(13
)
(33
)
(58
)
DD&A attributable to KML NCI
(4
)
(6
)
(19
)
(30
)
Income tax expense attributable to KML NCI
(1)
(2
)
(4
)
(8
)
(17
)
KML NCI DCF adjustments (1)
$
(13
)
$
(23
)
$
(60
)
$
(105
)
Net income attributable to NCI (GAAP)
$
(17
)
$
(8
)
$
(49
)
$
(310
)
Less: KML NCI (1)
(7
)
(13
)
(33
)
(58
)
Net (income) loss attributable to NCI (net
of KML NCI (1))
(10
)
5
(16
)
(252
)
NCI associated with Certain Items
(3
)
(8
)
(4
)
240
Net income attributable to NCI (net of KML
NCI and Certain Items)
$
(13
)
$
(3
)
$
(20
)
$
(12
)
Additional JV information
KMI's share of JV DD&A
$
(95
)
$
(97
)
$
(392
)
$
(390
)
KMI's share of JV income tax expense
(1)
(24
)
(20
)
(95
)
(82
)
KMI's share of JV DD&A and income tax
expense (1)
$
(119
)
$
(117
)
$
(487
)
$
(472
)
KMI's share of taxable JV cash taxes
$
(11
)
$
(18
)
$
(61
)
$
(68
)
KMI's share of JV sustaining capital
expenditures
$
(29
)
$
(28
)
$
(114
)
$
(105
)
CO2 Segment EBDA (GAAP) to CO2 Segment
Free Cash Flow Reconciliation
CO2 Segment EBDA (GAAP)
$
123
$
198
$
681
$
759
Certain Items:
Change in fair market value of derivative
contracts
(13
)
(61
)
(49
)
90
Loss on impairments
75
79
75
79
Refund and reserve adjustment of taxes,
other than income taxes
—
—
—
(21
)
CO2 Segment Certain Items
62
18
26
148
Capital expenditures
(83
)
(87
)
(349
)
(397
)
CO2 Segment Free Cash Flow (1)(2)
$
102
$
129
$
358
$
510
Notes
(1)
Amounts are adjusted for Certain
Items.
(2)
Includes sustaining and expansion
capital expenditures for our CO2 segment.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200122005666/en/
Dave Conover Media Relations (713) 420-6397
Newsroom@kindermorgan.com Investor Relations (800) 348-7320
km_ir@kindermorgan.com www.kindermorgan.com
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