Kinder Morgan, Inc.’s (NYSE: KMI) board of directors today
approved a cash dividend of $0.2625 per share for the first quarter
($1.05 annualized), payable on May 15, 2020, to common stockholders
of record as of the close of business on May 4, 2020. This dividend
represents a 5 percent increase over the fourth quarter 2019.
KMI is reporting first quarter net loss attributable to KMI of
$306 million, compared to net income attributable to KMI of $556
million in the first quarter of 2019; and distributable cash flow
(DCF) of $1,261 million, an 8 percent decrease over the first
quarter of 2019. The net loss was primarily due to $950 million of
non-cash impairments of assets and goodwill associated with certain
oil and gas producing assets in KMI’s CO2 segment driven by the
recent sharp decline in crude oil prices.
“The board deliberated thoughtfully with regard to this
quarter’s dividend,” said KMI Executive Chairman Richard D. Kinder.
“While we have the financial wherewithal to pay our previously
planned dividend increase, with significant coverage, in
unprecedented times such as these, the wise choice is to preserve
flexibility and balance sheet capacity. Consequently, we are not
increasing the dividend to the $1.25 annualized that we projected,
under far different circumstances, in July of 2017. Nevertheless,
as a sign of our confidence in the strength of our business and the
security of our cash flows, we are increasing the dividend to $1.05
annualized, a five percent increase. In doing so, we believe we
have struck the proper balance between maintaining balance sheet
strength and returning value to our shareholders. We remain
committed to increasing the dividend to $1.25 annualized. Assuming
a return to normal economic activity, we would expect to make that
determination when the board meets in January 2021 to determine the
dividend for the fourth quarter of 2020.”
“With the collapse of OPEC-plus on March 6 and the widespread
shut down of the U.S. economy beginning in mid-March, we
immediately re-examined our capital spending, our expenses, and how
we operate. Our priorities are the protection of our co-workers and
their families and the continued operation of our assets, which are
essential to businesses and communities across the country. All of
our businesses are running and we have modified our operations to
keep our employees safe. We are reducing our expenses and
sustaining capital expenditures by over $100 million combined
versus our budget without sacrificing safety. We have also reduced
our expansion capital outlook for 2020 by approximately $700
million, or almost 30 percent. These actions more than offset the
reduction in DCF and are expected to result in an improvement in
DCF less expansion capital expenditures of approximately $200
million compared to budget. In addition, the actions we have taken
over the last several years to strengthen our balance sheet,
including reducing our debt by almost $10 billion since the third
quarter of 2015, have strengthened us for these challenging times.
The services we provide continue to be needed to meet our
customers’ energy transportation and storage needs. Our business
model, which secures much of our cash flows on a take or pay basis
independent of underlying commodity prices, positions us well even
in the current environment,” said KMI Chief Executive Officer Steve
Kean.
“Sharp declines in both commodity prices and refined product
demand in the wake of the COVID-19 pandemic clearly affected our
business and will continue to do so in the near term. Largely due
to the non-cash impairments noted above, we generated a first
quarter earnings per common share loss of $0.14, compared to
earnings of $0.24 in the first quarter of 2019. At the same time,
we saw strong financial contributions from the Natural Gas
Pipelines group in the first quarter that were offset by the impact
of the sale of the U.S. portion of the Cochin pipeline in the
fourth quarter of 2019. Volumes on our gas pipelines were up 8
percent year over year and strength in transportation volumes has
continued into April,” said KMI President Kim Dang.
“Adjusted earnings per share in the first quarter of 2020 were
down 5 percent compared to the first quarter of 2019. At $0.55 per
common share, DCF per share was down $0.05 from the first quarter
of 2019, yet we achieved $664 million of excess DCF above our
declared dividend.
“We made substantial progress on our Permian Highway Pipeline
project, with the right-of-way secured and construction activities
well underway all along the route. As previously announced, given
the slower than anticipated pace of regulatory approvals, we expect
the project to be in service early in 2021. We also made good
progress on the Elba Liquefaction project, with the fifth of ten
liquefaction units placed in service during the quarter, and the
sixth on April 20. The remaining four units are expected to be
placed in service during the spring and summer of this year,”
concluded Dang.
2020 Outlook
For 2020, KMI’s budget contemplated DCF of approximately $5.1
billion ($2.24 per common share) and Adjusted EBITDA of
approximately $7.6 billion. Because of the COVID-19
pandemic-related reduced energy demand and the sharp decline in
commodity prices, the company now expects DCF to be below plan by
approximately 10 percent and Adjusted EBITDA to be below plan by
approximately 8 percent. As a result, KMI now expects to end 2020
with a Net Debt-to-Adjusted EBITDA ratio of approximately 4.6
times, consistent with our long-term objective of around 4.5 times.
Because considerable uncertainty exists with respect to the future
pace and extent of a global economic recovery from the effects of
the COVID-19 pandemic, Table 8 below provides assumptions and
sensitivities for impacts on our business that may be affected by
that uncertainty.
Market conditions also result in a number of planned expansion
projects no longer meeting our internal return thresholds, and we
are therefore reducing the budgeted $2.4 billion expansion projects
and contributions to joint ventures for 2020 by approximately $700
million. With this reduction, DCF less expansion capital
expenditures is improved by approximately $200 million compared to
budget, helping to keep our balance sheet strong.
KMI expects to use internally generated cash flow to fully fund
its 2020 dividend payments, as well as all of its 2020
discretionary spending, with no need to access equity markets.
As of March 31, 2020, we had over $3.9 billion of borrowing
capacity under our credit facility. We believe our cash from
operations, current cash on hand and excess borrowing capacity are
more than adequate to allow us to manage our day-to-day cash
requirements as well as the debt maturing over the next 12
months.
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, KMI does not provide budgeted net income attributable
to KMI 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).
Overview of Business
Segments
“The Natural Gas Pipelines segment’s financial
performance was down slightly for the first quarter of 2020
relative to the first quarter of 2019,” said Dang. “The segment saw
higher earnings due to contributions from the Elba Liquefaction and
the Gulf Coast Express (GCX) projects, offset by earnings lost from
the sale of the U.S. portion of the Cochin pipeline in the fourth
quarter of 2019, as well as reduced contributions from Tennessee
Gas Pipeline (TGP) due to historically mild weather in the
Northeast and the impact of the FERC 501-G rate settlement.
Excluding the impact of the Cochin sale, the segment’s financial
performance in the first quarter of 2020 was slightly better than
the same period in 2019.”
Natural gas transport volumes were up 8 percent compared to the
first quarter of 2019, with the largest gains on GCX, TGP, Colorado
Interstate Gas (CIG), El Paso Natural Gas (EPNG), and the Texas
Intrastates. Gains on GCX were due to its being placed in service,
TGP benefited from increased LNG deliveries, CIG from DJ growth and
higher heating demand, EPNG benefited from natural gas-fired power
generation replacing coal, and the Texas Intrastates from the
continued growth in the Texas Gulf Coast market. Natural gas
gathering volumes were up 2 percent from the first quarter of 2019
due primarily to higher volumes from our Eagle Ford and Bakken
systems, partially offset by decreased volumes on our KinderHawk
system. Excluding the impact of the Cochin sale, NGL transport
volumes were down 6 percent compared to the first quarter of 2019,
due to lower volumes on Utopia.
“The severe decline in commodity prices during the first quarter
which impacted inventory value on our transmix and crude and
condensate assets, as well as lower refined product demand in
March, reduced contributions from the Products Pipelines
segment. These impacts were partially offset by higher average
tariffs on our refined product pipelines as well as higher volumes
on our Bakken Crude assets,” Dang said.
Crude and condensate pipeline volumes were up 9 percent compared
to the prior period, in part due to KMCC’s new connection to
Permian Basin production via the Gray Oak Pipeline. In spite of the
decline in volumes in March mentioned above, total refined product
volumes were flat compared to the first quarter of 2019.
“Terminals segment earnings were lower compared to the
first quarter of 2019 predominantly driven by the impact of the
December 2019 sale of KML. Despite the emergence of COVID-19
related headwinds towards the end of the quarter, our liquids
business continued to perform well and benefit from strong
utilization, with the current contango commodity pricing
environment driving incremental storage demand across our network
of nearly 80 million barrels of storage capacity,” said Dang. “The
liquids business currently accounts for approximately 78 percent of
the segment total earnings.”
Excluding the impact of the sale of KML, contributions from the
Terminals segment’s bulk business were essentially flat compared to
the first quarter of 2019, with gains at our petroleum coke and
steel handling operations largely offsetting continued weakness in
export coal volumes.
“The CO2 segment was negatively impacted versus the first
quarter of 2019 primarily by lower crude and CO2 volumes, as well
as lower NGL prices, partially offset by higher realized crude
prices. Our weighted average NGL price for the quarter was down
$6.24 per barrel, or 24 percent from the first quarter of 2019. Our
realized weighted average crude oil price for the quarter was up 12
percent at $54.61 per barrel compared to $48.67 per barrel for the
first quarter of 2019, largely driven by our Midland/Cushing basis
hedges,” said Dang. “First quarter 2020 combined oil production
across all of our fields was down 6 percent compared to the same
period in 2019 on a net to KMI basis.”
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 used the
approximately $764 million in after-tax proceeds from the sale to
repay maturing debt.
- In February 2020, TGP issued $1 billion in senior notes due in
March 2030. The proceeds were used to repay $550 million in
intercompany notes due to KMI and for general corporate
purposes.
- During March 2020, KMI repurchased approximately 3.6 million
common shares for approximately $50 million at an average price of
$13.94 per share.
- Due to the public health impact of COVID-19 and out of concern
for the health and well-being of KMI’s stockholders and employees,
the Board has authorized KMI to change the format of its annual
meeting of stockholders, to be held on Wednesday, May 13, 2020 to a
virtual meeting format. In the coming days, KMI will issue a press
release to provide stockholders with instructions for accessing the
meeting.
Natural Gas Pipelines
- Construction activities on the Permian Highway Pipeline (PHP)
are now fully underway, and are nearly complete on the portion of
the project in the Waha area in Texas. 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.
- Elba Liquefaction Company (ELC) is continuing the commissioning
and startup of the ten liquefaction units that comprise its portion
of the Elba Liquefaction project. The fifth unit was placed in
service in March, and the sixth on April 20. The remaining four
units are expected to be placed in service during the spring and
summer 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.
- The Dayton Loop Project was placed in service in February 2020,
and is providing incremental takeaway capacity from the East Texas
and Goodrich areas to the Houston Ship Channel, Texas City and Katy
market areas. Construction activities continue on other projects
across KMI’s Texas intrastate system, and the company is investing
approximately $260 million in a collection of projects designed to
increase capacity by approximately 1.4 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.
- The approximately $56 million Sierrita Gas Pipeline Expansion
Project (KMI share: approximately $20 million) was placed in
service on April 12, 2020. 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. KMI is a 35 percent owner and the operator
of Sierrita Gas Pipeline.
- On February 21, 2020, FERC issued a 7c certificate to Natural
Gas Pipeline Company of America (NGPL) for its Gulf Coast
Southbound project. On March 31, 2020, the FERC approved NGPL’s
request to proceed with construction. 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.
Products Pipelines
- The Roanoke Expansion Project was placed in service on April 1,
2020. The full project (KMI’s share: approximately $25 million)
adds 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 consisted primarily of
additional pump capacity and operational storage.
Terminals
- Construction activities continue on a series of projects at
Kinder Morgan’s Pasadena Terminal and Jefferson Street Truck Rack,
located on the Houston Ship Channel. These approximately $127
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, which was recently placed in service. 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 continue 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.
- Construction continues on an expansion of Kinder Morgan’s
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. The project is expected to be completed in the third
quarter of 2020.
- Construction activities have begun on a facility upgrade at the
Battleground Oil Specialty Terminal Company LLC (BOSTCO), a leading
fuel oil storage terminal on the Houston Ship Channel. The upgrade
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
- The CO2 segment remains focused on capital discipline. The
segment has prioritized and reviewed its 2020 projects, taking into
account current pricing, and has eliminated projects that do not
generate attractive returns.
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 store and handle various commodities including gasoline,
diesel fuel chemicals, ethanol, metals and petroleum coke. For more
information, please visit www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. Eastern Time on
Wednesday, April 22, at www.kindermorgan.com for a LIVE webcast conference
call on the company’s first quarter earnings. A supplemental
Investor Update presentation is also available on the same page as
the webcast link.
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),
amortization of excess cost of equity investments and Certain Items
(Adjusted Segment EBDA); net income before interest expense, income
taxes, DD&A, amortization of excess cost of equity investments
and Certain Items (Adjusted EBITDA); Net Debt; Net Debt to Adjusted
EBITDA; Project EBITDA; and Free Cash Flow in relation to our CO2
segment are presented herein.
Our non-GAAP financial measures described 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 financial measures may differ from
similarly titled measures used by others. You should not consider
these non-GAAP financial 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 financial 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 (loss) income attributable to Kinder Morgan, Inc. 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 to
Kinder Morgan, Inc. 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
(loss) income attributable to Kinder Morgan, Inc. 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 to Kinder Morgan, Inc. 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) for the periods presented
through KML’s sale on December 15, 2019. 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, as used in this news
release, is a non-GAAP financial measure 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. (which was redeemed in January 2020), (iii) debt fair
value adjustments and (iv) the foreign exchange impact on
Euro-denominated bonds for which we have entered into currency
swaps. We believe the most comparable measure to 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; the future impact
on our business of the global economic consequences of the COVID-19
pandemic, 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. In addition to the
risk factors described herein, other 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, 2019 (under the
headings “Risk Factors” and “Information Regarding Forward-Looking
Statements” and elsewhere), its Current Report on Form 8-K dated
April 22, 2020 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 (Loss) Income
(Unaudited, in millions except
per share amounts)
Three Months Ended March
31,
% change
2020
2019
Revenues
$
3,106
$
3,429
Operating costs, expenses and other
Costs of sales
663
948
Operations and maintenance
620
598
Depreciation, depletion and
amortization
565
593
General and administrative
153
154
Taxes, other than income taxes
92
118
Loss on impairments and divestitures,
net
971
—
Other income, net
(1
)
—
Total operating costs, expenses and
other
3,063
2,411
Operating income
43
1,018
Other income (expense)
Earnings from equity investments
192
192
Amortization of excess cost of equity
investments
(32
)
(21
)
Interest, net
(436
)
(460
)
Other, net
2
10
(Loss) income before income taxes
(231
)
739
Income tax expense
(60
)
(172
)
Net (loss) income
(291
)
567
Net income attributable to NCI
(15
)
(11
)
Net (loss) income attributable to
Kinder Morgan, Inc.
$
(306
)
$
556
Class P Shares
Basic and diluted (loss) earnings per
common share
$
(0.14
)
$
0.24
(158
)%
Basic and diluted weighted average common
shares outstanding
2,264
2,262
—
%
Declared dividends per common share
$
0.2625
$
0.25
5
%
Adjusted Earnings (1)
$
541
$
571
(5
)%
Adjusted Earnings per common share (1)
$
0.24
$
0.25
(4
)%
Note
(1)
Adjusted Earnings is Net (loss) income
attributable to Kinder Morgan, Inc. 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
(loss) earnings per common share.
Table 2
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Net (Loss) Income
Attributable to Kinder Morgan, Inc. to Adjusted Earnings and DCF
Reconciliation
(Unaudited, in
millions)
Three Months Ended March
31,
% change
2020
2019
Net (loss) income attributable to
Kinder Morgan, Inc. (GAAP)
$
(306
)
$
556
Total Certain Items
847
15
Adjusted Earnings (1)
541
571
(5
)%
DD&A and amortization of excess cost
of equity investments for DCF (2)
691
708
Income tax expense for DCF (1)(2)
181
195
Cash taxes (3)
(3
)
(13
)
Sustaining capital expenditures (3)
(141
)
(115
)
Other items (4)
(8
)
25
DCF
$
1,261
$
1,371
(8
)%
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 March
31,
% change
2020
2019
Natural Gas Pipelines
$
1,179
$
1,201
(2
)%
Products Pipelines
273
293
(7
)%
Terminals
257
299
(14
)%
CO2
175
189
(7
)%
Adjusted Segment EBDA (1)
1,884
1,982
(5
)%
General and administrative and corporate
charges (1)
(140
)
(158
)
KMI's share of JV DD&A and income tax
expense (1)(5)
119
126
Net income Attributable to NCI (net of KML
NCI and Certain Items) (1)
(15
)
(3
)
Adjusted EBITDA
1,848
1,947
(5
)%
Interest, net (1)
(435
)
(458
)
Cash taxes (3)
(3
)
(13
)
Sustaining capital expenditures (3)
(141
)
(115
)
KML NCI DCF adjustments (6)
—
(15
)
Other items (4)
(8
)
25
DCF
$
1,261
$
1,371
(8
)%
Weighted average common shares outstanding
for dividends (7)
2,277
2,275
DCF per common share
$
0.55
$
0.60
Declared dividends per common share
$
0.2625
$
0.25
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, as applicable. 2019 amounts are also net of
DD&A or income tax expense Attributable to KML NCI.
(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)
KMI's share of unconsolidated JV DD&A
and income tax expense, net of consolidating JV partners' share of
DD&A.
(6)
2019 amount represents the combined net
income, DD&A and income tax expense adjusted for Certain Items,
as applicable, Attributable to KML NCI. See Table 7.
(7)
Includes restricted stock awards that
participate in common share dividends.
Table 4
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Net (Loss) Income
to Adjusted EBITDA Reconciliation
(Unaudited, in
millions)
Three Months Ended March
31,
% change
2020
2019
Net (loss) income (GAAP)
$
(291
)
$
567
(151
)%
Certain Items:
Fair value amortization
(8
)
(8
)
Legal, environmental and taxes other than
income tax reserves
(8
)
17
Change in fair value of derivative
contracts (1)
(36
)
10
Loss on impairments and divestitures, net
(2)
371
2
Loss on impairment of goodwill (3)
600
—
Income tax Certain Items
(96
)
2
Other
24
(8
)
Total Certain Items
847
15
DD&A and amortization of excess cost
of equity investments
597
614
Income tax expense (4)
156
170
KMI's share of JV DD&A and income tax
expense (4)(5)
119
126
Interest, net (4)
435
458
Net income attributable to NCI (net of KML
NCI (4))
(15
)
(3
)
Adjusted EBITDA
$
1,848
$
1,947
(5
)%
Notes
(1)
Gains or losses are reflected in our DCF
when realized.
(2)
2020 amount primarily includes a pre-tax
non-cash impairment loss of $350 million related to oil and gas
producing assets in our CO2 business segment driven by low oil
prices and is reported within “Loss on impairments and
divestitures, net” on the accompanying Preliminary Consolidated
Statement of Income. (See Table 1.)
(3)
2020 amount represents an impairment of
goodwill associated with our CO2 reporting unit.
(4)
Amounts are adjusted for Certain Items.
See Table 7 for more information.
(5)
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 March
31,
2020
2019
Natural Gas Pipelines
Transport volumes (BBtu/d)
39,095
36,044
Sales volumes (BBtu/d)
2,495
2,332
Gas gathering volumes (BBtu/d)
3,361
3,301
NGLs (MBbl/d) (1)
30
32
Products Pipelines (MBbl/d)
Gasoline (2)
961
980
Diesel fuel
358
337
Jet fuel
293
294
Total refined product volumes
1,612
1,611
Crude and condensate
702
643
Total delivery volumes (MBbl/d)
2,314
2,254
Terminals (1)
Liquids leasable capacity (MMBbl)
79.5
79.3
Liquids utilization %
93.7
%
94.0
%
Bulk transload tonnage (MMtons)
13.0
13.6
CO2
SACROC oil production
23.19
24.43
Yates oil production
7.04
7.25
Katz and Goldsmith oil production
3.36
4.11
Tall Cotton oil production
2.41
2.61
Total oil production - net (MBbl/d)
(4)
36.00
38.40
NGL sales volumes - net (MBbl/d) (4)
9.84
10.10
CO2 production - net (Bcf/d)
0.55
0.63
Realized weighted average oil price per
Bbl
$
54.61
$
48.67
Realized weighted average NGL price per
Bbl
$
19.74
$
25.98
CO2 Segment Hedges
Remaining 2020
2021
2022
2023
Crude Oil (3)
Price ($/barrel)
$
55.60
$
54.15
$
54.60
$
52.81
Volume (barrels per day)
31,070
16,600
7,700
4,000
NGLs
Price ($/barrel)
$
28.66
$
23.88
Volume (barrels per day)
5,353
247
Midland-to-Cushing Basis Spread
Price ($/barrel)
$
0.14
Volume (barrels per day)
31,100
Notes
(1)
Volumes for assets sold are excluded for
all periods presented.
(2)
Gasoline volumes include ethanol pipeline
volumes.
(3)
Net of royalties and outside working
interests.
(4)
Includes West Texas Intermediate
hedges.
Table 6
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Consolidated
Balance Sheets
(Unaudited, in
millions)
March 31,
December 31,
2020
2019
Assets
Cash and cash equivalents
$
360
$
185
Other current assets
2,736
3,053
Property, plant and equipment, net
36,041
36,419
Investments
7,886
7,759
Goodwill
20,851
21,451
Deferred charges and other assets
5,656
5,290
Total assets
$
73,530
$
74,157
Liabilities, Redeemable Noncontrolling
Interest and Shareholders' Equity
Short-term debt
$
3,540
$
2,377
Preferred interest in general partner of
KMP
—
100
Other current liabilities
2,068
2,623
Long-term debt
29,955
30,883
Debt fair value adjustments
1,450
1,032
Other
2,260
2,253
Total liabilities
39,273
39,268
Redeemable Noncontrolling Interest
793
803
Other shareholders' equity
33,168
34,075
Accumulated other comprehensive loss
(62
)
(333
)
KMI equity
33,106
33,742
Noncontrolling interests
358
344
Total shareholders' equity
33,464
34,086
Total liabilities, redeemable
noncontrolling interest and shareholders' equity
$
73,530
$
74,157
Net Debt (1)
$
32,562
$
33,031
Adjusted EBITDA Twelve Months
Ended
March 31,
December 31,
Reconciliation of Net Income to
Adjusted EBITDA
2020
2019
Net income (GAAP)
$
1,381
$
2,239
Total Certain Items
803
(29
)
Net income attributable to NCI (net of KML
NCI) (2)
(29
)
(16
)
DD&A and amortization of excess cost
of equity investments
2,477
2,494
Income tax expense (3)
613
627
KMI's share of JV DD&A and income tax
expense (3)
481
487
Interest, net (3)
1,793
1,816
Adjusted EBITDA
$
7,519
$
7,618
Net Debt to Adjusted EBITDA
4.3
4.3
Notes
(1)
Amounts exclude: (i) the preferred
interest in general partner of KMP (which was redeemed in January
2020); (ii) debt fair value adjustments; and (iii) the foreign
exchange impact on our Euro denominated debt of $21 million and $44
million as of March 31, 2020 and December 31, 2019, respectively,
as we have entered into swaps to convert that debt to U.S.$. 2020
cash component of net debt was increased by $552 million for
restricted cash that was in "Other current assets" as this cash was
held in escrow at the time and used on April 1, 2020 for the
redemption of $535 million of senior notes plus associated accrued
interest.
(2)
2020 and 2019 amounts are net of KML NCI
of $24 million and $33 million, respectively.
(3)
Amounts are adjusted for Certain
Items.
Table 7
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Supplemental
Information
(Unaudited, in
millions)
Three Months Ended March
31,
2020
2019
Segment EBDA
Natural Gas Pipelines (GAAP)
$
1,196
$
1,203
Certain Items
(17
)
(2
)
Natural Gas Pipelines Adjusted Segment
EBDA
1,179
1,201
Products Pipelines (GAAP)
269
276
Certain Items
4
17
Products Pipelines Adjusted Segment
EBDA
273
293
Terminals (GAAP)
257
299
Certain Items
—
—
Terminals Adjusted Segment EBDA
257
299
CO2 (GAAP)
(755
)
198
Certain Items
930
(9
)
CO2 Adjusted Segment EBDA
175
189
Kinder Morgan Canada (GAAP)
—
(2
)
Certain Items
—
2
Kinder Morgan Canada Adjusted Segment
EBDA
—
—
Total Segment EBDA (GAAP)
967
1,974
Total Segment EBDA Certain Items
917
8
Total Adjusted Segment EBDA
$
1,884
$
1,982
Depreciation, depletion and amortization
(GAAP)
$
(565
)
$
(593
)
Amortization of excess cost of equity
investments (GAAP)
(32
)
(21
)
DD&A and amortization of excess cost
of equity investments
(597
)
(614
)
KMI's share of JV DD&A
(94
)
(99
)
DD&A attributable to KML NCI
—
5
DD&A and amortization of excess cost
of equity investments for DCF
$
(691
)
$
(708
)
General and administrative (GAAP)
$
(153
)
$
(154
)
Corporate charges
(12
)
(7
)
Certain Items
25
3
General and administrative and corporate
charges (1)
$
(140
)
$
(158
)
Interest, net (GAAP)
$
(436
)
$
(460
)
Certain Items
1
2
Interest, net (1)
$
(435
)
$
(458
)
Income tax expense (GAAP)
$
(60
)
$
(172
)
Certain Items
(96
)
2
Income tax expense (1)
(156
)
(170
)
KMI's share of taxable JV income tax
expense (1)
(25
)
(27
)
Income tax expense attributable to KML NCI
(1)
—
2
Income tax expense for DCF (1)
$
(181
)
$
(195
)
Net income attributable to KML NCI
$
—
$
(8
)
KML NCI associated with Certain Items
—
—
KML NCI (1)
—
(8
)
DD&A attributable to KML NCI
—
(5
)
Income tax expense attributable to KML NCI
(1)
—
(2
)
KML NCI DCF adjustments (1)
$
—
$
(15
)
Net income attributable to NCI (GAAP)
$
(15
)
$
(11
)
Less: KML NCI (1)
—
(8
)
Net income attributable to NCI (net of KML
NCI (1))
(15
)
(3
)
NCI associated with Certain Items
—
—
Net income attributable to NCI (net of KML
NCI and Certain Items)
$
(15
)
$
(3
)
Additional JV information
KMI's share of JV DD&A
$
(94
)
$
(99
)
KMI's share of JV income tax expense
(1)
(25
)
(27
)
KMI's share of JV DD&A and income tax
expense (1)
$
(119
)
$
(126
)
KMI's share of taxable JV cash taxes
$
(4
)
$
—
KMI's share of JV sustaining capital
expenditures
$
(26
)
$
(19
)
CO2 Segment EBDA (GAAP) to CO2 Segment
Free Cash Flow Reconciliation
CO2 Segment EBDA (GAAP)
$
(755
)
$
198
Certain Items:
Change in fair value of derivative
contracts
(20
)
(9
)
Loss on impairments
950
—
CO2 Segment Certain Items
930
(9
)
Capital expenditures
(70
)
(85
)
CO2 Segment Free Cash Flow (1)(2)
$
105
$
104
Notes
(1)
Amounts are adjusted for Certain
Items.
(2)
Includes sustaining and expansion capital
expenditures for our CO2 segment.
Table 8
Kinder Morgan, Inc. and
Subsidiaries
2020 Outlook Assumptions and
Sensitivity
Forecast as of April 20,
2020
(Unaudited)
Remaining 9 Months Commodity
Volumes and Price Assumptions
Sensitivity Range
Potential Impact to 2020
Adjusted EBITDA (in millions, by segment)
Natural Gas Pipelines
Products Pipelines
Terminals
CO2
Total
Natural Gas Gathering and Processing
Volumes
3,325 Bbtu/d
+/- 5%
$
23
$
23
Refined Products Volumes (gasoline,
diesel and jet fuel)
1,452 MBbl/d for Products Pipelines (the
following apply to both the Products Pipelines and Terminals
segments) (1)
+/- 5%
$
26
$
12
$
38
Qtr 2: 40% - 45% reduction from budgeted
quarter amount
Qtr 3: 10% - 12% reduction from budgeted
quarter amount
Qtr 4: 5% - 6% reduction from budgeted
quarter amount
Crude Oil & Condensate Pipeline
Volumes
587 MBbl/d
+/- 5%
$
11
$
11
Crude Oil Production Volumes
46 MBbl/d, gross (33 MBbl/d, net)
+/- 5%
$
12
$
12
Crude Oil Price
$30/bbl
+/- $1/bbl WTI
$
0.2
$
0.9
$
0.5
$
1.6
NGL to Crude Oil Price Ratio
Natural Gas Pipelines 49% and CO2 25%
+/- 1%
$
0.1
$
0.4
$
0.5
Potential Impact to 2020 DCF
(in millions)
3-Month LIBOR Interest Rate (2)
Total
0.64%
+/- 10-bp
$
2.4
Purpose of Outlook Assumptions and
Sensitivity:
The above table provides key assumptions
used in our 2020 forecast for the remaining 9 months of 2020 to
incorporate the estimated impact of COVID-19 and oil price decline.
It also provides estimated financial impacts to 2020 Adjusted
EBITDA and DCF for potential changes in those assumptions. These
sensitivities are general estimates of anticipated impacts on our
business segments and overall business of changes relative to our
assumptions; the impact of actual changes may vary significantly
depending on the affected asset, product and contract.
Notes
(1)
Potential impact to 2020 Adjusted EBITDA for Terminals includes
sensitivity to changes in petroleum coke volume.
(2)
As of March 31, 2020, we had approximately
$8.0 billion of fixed-to-floating interest rate swaps on our
long-term debt. In March 2020, we fixed the LIBOR component on $2.5
billion of our floating rate swaps through the end of 2020 only. As
a result, approximately 17% of the principal amount of our debt
balance as of March 31, 2020 was subject to variable interest
rates—either as short-term or long-term variable rate debt
obligations or as fixed-rate debt converted to variable rates
through the use of interest rate swaps.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200422005942/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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