Will Pay $0.20 for First Quarter
Kinder Morgan, Inc. (NYSE: KMI) today announced that its board
of directors approved a cash dividend of $0.20 per share for the
first quarter ($0.80 annualized) payable on May 15, 2018, to common
stockholders of record as of the close of business on April 30,
2018. This is a 60 percent increase from last quarter’s dividend,
and is consistent with the plan KMI announced during the summer of
2017. KMI continues to expect to use cash in excess of dividend
payments to fully fund growth investments, further strengthening
its balance sheet.
“The board delivered on our commitment made in mid-2017 with the
$0.20 dividend we are declaring today,” said Richard D. Kinder,
Executive Chairman. “Even with the substantial dividend increase,
we still expect to internally fund all of our growth capital with
some excess remaining. In the first quarter, we used some of that
excess to repurchase shares. In addition, we remain committed to
continuing the important work of strengthening our balance sheet
and attaining a Net Debt-to-Adjusted EBITDA ratio of at or below
five times. For the foreseeable future, we expect to continue
funding all growth capital through operating cash flows with no
need to access capital markets for growth capital,” Kinder
added.
Chief Executive Officer Steve Kean said, “One of the strengths
of this company is strategically positioned fee-based assets that
generate predictable cash flows, and this quarter once again
demonstrated that strength. Several business units achieved strong
financial performance in the first quarter and are poised to
continue that success through the remainder of the year. During the
first quarter, we made substantial progress on the Elba
Liquefaction Project and began work on the Gulf Coast Express
Project. We had very good commercial and operating performance,
exceeding our plan for the quarter and are showing first quarter
earnings per common share of $0.22.”
Kean continued, “For the quarter, we achieved distributable cash
flow (DCF) of $0.56 per common share, representing 4 percent growth
over the first quarter of 2017, resulting in $804 million of excess
DCF above our dividend. Kinder Morgan’s top priority is generating
significant shareholder value and completing attractive return
growth projects is a key part of that commitment. We continue to
have good success in this area as we completed approximately $700
million of projects while adding approximately $900 million of new
projects to our backlog during the first quarter. These new
projects have attractive returns as demonstrated by our average
capital-to-EBITDA multiple (excluding the CO2 segment) improving
during the quarter to approximately 6.0 times.”
KMI reported first quarter net income available to common
stockholders of $485 million, compared to $401 million for the
first quarter of 2017, and DCF of $1,247 million, up 3 percent from
$1,215 million for the comparable period in 2017. The increase in
DCF was driven by greater contributions from the Natural Gas and
CO2 Business Units, partially offset by higher cash taxes, greater
sustaining capital, and the impact of the KML IPO. Net income
available to common stockholders was further impacted by a $34
million unfavorable change in total Certain Items (as described
under “Non-GAAP Financial Measures” below) compared to the first
quarter of 2017. First quarter 2018 Certain Items had minimal
impact with a few largely offsetting items: legal and environmental
reserves (related primarily to the SFPP rate case) and unsettled
market value of hedges offset by favorable impacts from tax reform
on certain joint ventures. First quarter 2017 Certain Items were
positive due primarily to a favorable outcome on a bankruptcy
claim.
2018 Outlook
For 2018, KMI’s budget is set to declare dividends of $0.80 per
common share and achieve DCF of approximately $4.57 billion ($2.05
per common share) and Adjusted EBITDA of approximately $7.5
billion, and it expects to meet or exceed those DCF and Adjusted
EBITDA targets. KMI now forecasts to invest $2.3 billion in growth
projects during 2018 (excluding growth capital expected to be
funded by KML), up $100 million from the budget, to be funded with
internally generated cash flow without the need to access capital
markets. KMI also expects to meet or beat its budgeted leverage
metric of a year-end Net Debt-to-Adjusted EBITDA ratio of
approximately 5.1 times.
KMI previously announced it would further enhance shareholder
value through a $2 billion share buy-back program. KMI’s Board of
Directors authorized the program to begin in December 2017. Since
then, KMI has repurchased approximately 27 million shares for
approximately $500 million. KMI plans to further utilize this
program opportunistically.
KMI does not provide budgeted net income attributable to common
stockholders (the GAAP financial measure most directly comparable
to DCF and Adjusted EBITDA) due to the impracticality of predicting
certain amounts required by GAAP, such as ineffectiveness on
commodity, interest rate and foreign currency hedges, unrealized
gains and losses on derivatives marked to market, and potential
changes in estimates for certain contingent liabilities.
KMI’s expectations assume average annual prices for West Texas
Intermediate (WTI) crude oil of $56.50 per barrel and Henry Hub
natural gas of $3 per MMBtu, consistent with forward pricing during
the company’s budget process. The vast majority of cash KMI
generates is fee-based and therefore not directly exposed to
commodity prices. The primary area where KMI has commodity price
sensitivity is in its CO2 segment, with the majority of the
segment’s next 12 months of oil and NGL production hedged to
minimize this sensitivity. The segment is currently hedged for
32,970 barrels per day (Bbl/d) at $59.65/Bbl in 2018; 21,900 Bbl/d
at $55.52/Bbl in 2019; 10,500 Bbl/d at $53.09/Bbl in 2020; 5,500
Bbl/d at $52.22/Bbl in 2021; and 500 Bbl/d at $52.85 in 2022. For
2018, KMI estimates that every $1 per barrel change in the average
WTI crude oil price from the company’s budget of $56.50 per barrel
would impact budgeted DCF by approximately $7 million and each
$0.10 per MMBtu change in the price of natural gas from the
company’s budget of $3 per MMBtu would impact budgeted DCF by
approximately $1 million.
Overview of Business
Segments
“The Natural Gas Pipelines segment’s performance for the
first quarter of 2018 was 6 percent higher relative to the first
quarter of 2017. The segment benefited from increased contributions
from the Texas Intrastate System, due to cold winter weather; from
various midstream gathering and processing assets, including
Hiland, due to increased drilling activity; from NGPL due to lower
interest expense and greater transport revenue; from Southern
Natural Gas due primarily to weather; from El Paso Natural Gas
(EPNG) due to greater capacity sales; and from Florida Gas
Transmission Pipeline driven by lower taxes,” Kean said. “The year
is shaping up very well for our Natural Gas segment,” continued
Kean. “Certainly winter weather helped, as we set records on four
of our large gas transmission systems, but supply and demand for
natural gas is elevating the value of our best in class network as
well.”
Natural gas transport volumes were up 10 percent compared to the
first quarter of 2017, driven by higher throughput on TGP due to
winter weather, power demand and projects placed in service; on
NGPL due to winter weather, power demand and deliveries to Mexico;
on EPNG due to additional Permian capacity sales; and on CIG due to
winter weather. Natural gas gathering volumes were up 1 percent
from the first quarter of 2017 due primarily to higher volumes on
the KinderHawk and Hiland systems, partially offset by lower
volumes on Copano South Texas.
Natural gas is critical to the American economy and to meeting
the world’s evolving energy and manufacturing needs. Objective
analysts project U.S. natural gas demand, including net exports of
liquefied natural gas (LNG) and net exports to Mexico, will
increase by more than 30 percent to approximately 105 billion cubic
feet per day (Bcf/d) by 2027. Of the natural gas consumed in the
U.S., about 40 percent moves on KMI pipelines. While a substantial
majority of natural gas is consumed in industrial, commercial and
residential heating uses, KMI expects future natural gas
infrastructure opportunities will also be driven by greater demand
for gas-fired power generation across the country, LNG exports,
exports to Mexico, and continued industrial development,
particularly in the petrochemical industry. Compared to the first
quarter of 2017, natural gas deliveries on KMI pipelines to Mexico
were up 2 percent, and KMI transports roughly 70 percent of all
U.S. natural gas exports destined for Mexico. Deliveries to the
Sabine Pass LNG facility were approximately 600,000 dekatherms per
day (Dth/d) during the quarter.
“The CO2 segment was helped by higher commodity
prices, as our realized weighted average oil price for the quarter
was $59.72 per barrel compared to $58.14 per barrel for the first
quarter of 2017, while NGL prices were up 24 percent and CO2 prices
were up 7 percent,” Kean said. “Combined oil production across all
of our fields was up 5 percent compared to 2017 on a net to Kinder
Morgan basis, primarily due to strong performance at our SACROC and
Tall Cotton assets. First quarter 2018 net NGL sales volumes of
10.2 thousand barrels per day (MBbl/d) were flat to the same period
in 2017. In total, oil production on a net-to-Kinder Morgan basis
exceeded plan for the first quarter.”
“Terminals segment volumes across the network were up 11
million barrels, or 5 percent, compared to first quarter of 2017,
including contributions from storage capacity increases in key
liquids hubs along the Houston Ship Channel and Edmonton, Alberta,
where we placed in-service the first 6 tanks of our 12-tank, 4.8
million barrel Base Line Terminal crude oil merchant storage joint
venture,” said Kean. “Earnings were down 2 percent compared to the
first quarter of 2017. Earnings from expansion projects, including
new build Jones Act tankers, were slightly more than offset by
divestitures, decreased contributions from existing Jones Act
tankers driven by lower charter rates, and some softness in tank
utilization at our Staten Island, New York, and Harvey, Louisiana,
locations, among other things.”
“The Products Pipelines segment contributions were up 1
percent compared with first quarter 2017 performance due largely to
increased contributions from the Cochin and Double H Pipelines,
partially offset by decreased contributions from the KMCC
pipeline,” Kean said.
Total refined products volumes were up 1 percent for the first
quarter versus the same period in 2017. Ethanol volumes were up 9
percent while crude and condensate pipeline volumes were down 6
percent from the first quarter of 2017.
Kinder Morgan Canada contributions were up 7 percent in
the first quarter of 2018 compared to the first quarter of 2017.
This was largely due to higher capitalized equity financing costs
associated with spending on the Trans Mountain Expansion
Project.
Other News
New KMI Leadership Roles
The KMI board of directors has appointed Kimberly A. Dang as
President, Dax A. Sanders as Executive Vice President and Chief
Strategy Officer, David P. Michels as Vice President and Chief
Financial Officer, and Anthony B. Ashley, currently Vice President
and Treasurer, as Treasurer and Vice President of Investor
Relations. Richard D. Kinder will remain executive chairman and
Steven J. Kean will remain chief executive officer.
Kim Dang joined KMI in 2001 and has served as chief financial
officer of the company since 2005. Dang joined the Office of the
Chairman of KMI in 2014, which also includes Rich Kinder, executive
chairman, and Steve Kean, chief executive officer. She was
unanimously elected to the KMI board of directors in January 2017.
Kim’s promotion to President signifies her growing role in the
company’s strategic and policy decisions, day-to-day management,
and capital allocation decisions. Her new role is also a key part
of the company’s succession planning.
Dax Sanders joined KMI in 2000, was named vice president in the
corporate development group in 2009, and became head of the group
in 2013. Dax has played a crucial role in the company’s strategic
decisions, acquisitions and divestiture activity - including post
acquisition integration leadership - and in key joint ventures. In
his new role, he will continue to be responsible for corporate
development and will play an increased role in strategy formation
and capital allocation decisions. He will also continue as Chief
Financial Officer of Kinder Morgan Canada Limited (KML).
David Michels was named vice president of finance and investor
relations in 2013, having joined KMI in 2012. He also served as CFO
of El Paso Pipeline Partners (EPB) from March 2013 until November
2014, when EPB was acquired by KMI. As Vice President and CFO,
Michels will manage the functional departments of controller,
finance, tax, and treasury.
Anthony Ashley, currently vice president and treasurer of KMI,
will assume direct responsibility for investor relations along with
a new title as treasurer and vice president of investor
relations.
Natural Gas Pipelines
- The first four liquefaction units have
been delivered, and construction is progressing on the nearly $2
billion Elba Liquefaction Project. The federally approved
liquefaction project at the existing Southern LNG Company facility
at Elba Island near Savannah, Georgia, 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 of natural gas. The project is supported by a 20-year contract
with Shell, and initial in-service is expected in the third quarter
of 2018 with final units coming on line by mid-2019. Elba
Liquefaction Company, L.L.C. (ELC), a KMI joint venture with EIG
Global Energy Partners as a 49 percent partner, will own 10
liquefaction units and other ancillary equipment. Certain other
facilities associated with the project are 100 percent owned by
KMI. Construction is also ongoing on the Elba Express Modification
Project which will add upstream compression facilities on the Elba
Express pipeline to provide ample feed gas for liquefaction.
- KMI began work on the Gulf Coast
Express Pipeline Project (GCX Project) in the first quarter, with
landowner discussions and easement acquisitions underway. The
approximately $1.75 billion GCX Project is designed to transport up
to 1.98 Bcf/d of natural gas from the Permian Basin to the Agua
Dulce, Texas, area and is 94 percent subscribed under long-term,
binding transportation agreements. A contract for the remaining
capacity is pending. The project is expected to be in service in
October 2019, pending the receipt of necessary regulatory
approvals. KMI will build, operate and own a 50 percent interest in
the GCX Project, and DCP Midstream and an affiliate of Targa
Resources will each hold a 25 percent equity interest in the
project. In addition to transportation agreements, shipper Apache
Corporation has an option to purchase up to a 15 percent equity
stake in the project from Kinder Morgan.
- EPNG has executed firm agreements with
multiple shippers to transport over 1,000,000 Dth/d of incremental
natural gas on its system in the Permian Basin to delivery points
that include the GCX Project. This incremental transportation
capacity is being made available through a combination of existing
capacity and minor modifications and expansions to EPNG’s system in
Texas.
- On Feb. 15, 2018, the FERC issued an
order approving the approximately $240 million SNG Fairburn
Expansion Project in Georgia ($120 million of which is KMI’s share)
and construction is underway. The project is designed to provide
approximately 340,000 Dth/d of incremental long-term firm natural
gas transportation capacity into the Southeast market beginning in
the fourth quarter of 2018. SNG is a joint venture equally owned by
subsidiaries of KMI and Southern Company.
- NGPL has finalized terms for a second
phase of its Gulf Coast Southbound Expansion Project. The project
involves capital spend of approximately $226 million (KMI’s share:
$113 million) and is supported by a long-term take-or-pay contract
to transport gas with a third-party. Going ahead with the project
is contingent on a decision by the third-party to proceed with
expansion at its facility; however, all indications are positive
and we have a high degree of confidence in the execution of this
project.
- On March 1, 2018, TGP placed its
approximately $178 million Southwest Louisiana Supply Project into
service. The project is designed to provide 900,000 Dth/d of
capacity to the Cameron LNG export facility in Cameron Parish,
Louisiana.
- TGP commenced construction on its
approximately $128 million Lone Star Project after receiving FERC’s
Notice to Proceed on Jan. 16, 2018. The project will provide
300,000 Dth/d of capacity under a long-term contract to Cheniere’s
planned Corpus Christi Liquefaction Project in South Texas and is
expected to be placed into commercial service in January 2019.
- Kinder Morgan Louisiana Pipeline (KMLP)
commenced construction on its approximately $122 million expansion
project to provide 600,000 Dth/d of capacity to serve Train 5 at
Cheniere’s Sabine Pass LNG Terminal. The KMLP project is
anticipated to be placed into commercial service as early as the
first quarter of 2019.
CO2
- The approximately $66 million second
phase of KMI’s Tall Cotton field project is complete and production
has grown by 58 percent year over year. Tall Cotton is the
industry’s first greenfield Residual Oil Zone CO2 project, marking
the first time CO2 has been used for enhanced oil recovery in a
field without a main pay zone.
- KMI continues to find high-return
enhanced oil recovery projects in the current price environment
across its robust portfolio of assets.
Terminals
- At the Base Line Terminal, a 50-50
joint venture crude oil merchant storage terminal being developed
in Edmonton, Alberta, Canada, by KML and Keyera Corp., construction
of all major facilities is materially complete. The first 6 tanks
at the 12-tank, 4.8 million barrel facility, which is fully
contracted with long-term, firm take-or-pay agreements with
creditworthy customers, were placed into service in the first
quarter 2018, with the balance to be phased into service throughout
the year. Kinder Morgan’s investment in the joint venture terminal
is approximately C$398 million, including costs associated with the
construction of a pipeline segment funded solely by KML. The
project is forecast to be on schedule and on budget.
Products Pipelines
- On Jan.23, 2018, KMI announced the
Utopia Pipeline Project began commercial service, delivering ethane
from Harrison County, Ohio to Windsor, Ontario, Canada. The
pipeline system extends approximately 270 miles and has a design
capacity of 50,000 Bbls/d and can be expanded to more than 75,000
Bbls/d. As previously announced, the project is fully supported by
a long-term, fee-based transportation agreement with a
petrochemical customer.
Kinder Morgan Canada
- On April 8, 2018, KML announced that it
was suspending all non-essential activities and related spending on
the Trans Mountain Expansion Project. KML also announced that under
current circumstances, specifically including the continued actions
in opposition to the Project by the Province of British Columbia,
it will not commit additional shareholder resources to the Project.
However, KML further announced that it will consult with various
stakeholders in an effort to reach agreements by May 31st that may
allow the Project to proceed. The company stated it is difficult to
conceive of any scenario in which it would proceed with the Project
if an agreement is not reached by May 31st. The focus in those
consultations will be on two principles: clarity on the path
forward, particularly with respect to the ability to construct
through BC; and, adequate protection of KML shareholders.KML had
previously announced a “primarily permitting” strategy for the
first half of 2018, focused on advancing the permitting process,
rather than spending at full construction levels, until it obtained
greater clarity on outstanding permits, approvals and judicial
reviews. Rather than achieving greater clarity, the Project is now
facing unquantifiable risk. Previously, opposition by the Province
of British Columbia was manifesting itself largely through BC’s
participation in an ongoing judicial review. Unfortunately BC has
now been asserting broad jurisdiction and reiterating its intention
to use that jurisdiction to stop the Project. BC’s intention in
that regard has been neither validated nor quashed, and the
Province has continued to threaten unspecified additional actions
to prevent Project success. Those actions have created even
greater, and growing, uncertainty with respect to the regulatory
landscape facing the Project. In addition, the parties still await
judicial decisions on challenges to the original Order in Council
and the BC Environmental Assessment Certificate approving the
Project. These items, combined with the impending approach of
critical construction windows, the lead-time required to ramp up
spending, and the imperative that the company avoid incurring
significant debt while lacking the necessary clarity, brought KML
to the decision it announced on April 8th. Given the current
uncertain conditions, KML is not updating its cost and schedule
estimate at this time. In the event the Project is terminated,
resulting impairments, foregone capitalized equity financing costs
and potential wind down costs would have a significant effect on
KML’s results of operations. Potential impairments would be
recognized primarily in the period in which the decision to
terminate is made.
Financing
In March 2018, KMI issued $1.25 billion of 10 year senior notes
at a fixed rate of 4.30 percent and $750 million of 30 year senior
notes at a fixed rate of 5.20 percent. KMI used the proceeds from
the issuance of the notes to repay existing indebtedness and for
general corporate purposes.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy
infrastructure companies in North America. It owns an interest in
or operates approximately 85,000 miles of pipelines and
152 terminals. KMI’s pipelines transport natural gas, refined
petroleum products, crude oil, condensate, CO2 and other products,
and its terminals transload and store petroleum products, ethanol
and chemicals, and handle such products as steel, coal and
petroleum coke. It is also a leading producer of CO2 that we and
others use for enhanced oil recovery projects primarily in the
Permian basin. For more information please visit
www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. Eastern Time on
Wednesday, April 18, at www.kindermorgan.com for a
LIVE webcast conference call on the company’s first quarter
earnings.
Non-GAAP Financial
Measures
The non-generally accepted accounting principles (non-GAAP)
financial measures of distributable cash flow (DCF), both in the
aggregate and per share, segment earnings before depreciation,
depletion, amortization and amortization of excess cost of equity
investments (DD&A) and Certain Items (Segment EBDA before
Certain Items), net income before interest expense, taxes, DD&A
and Certain Items (Adjusted EBITDA), Adjusted Earnings and Adjusted
Earnings per common share are presented herein.
Certain Items as 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).
DCF is calculated by adjusting net
income available to common stockholders before Certain Items for
DD&A, total book and cash taxes, sustaining capital
expenditures and other items. DCF is a significant performance
measure useful to management and by external users of our financial
statements in evaluating our performance and to measure and
estimate the ability of our assets to generate cash earnings after
servicing our debt and preferred stock dividends, paying cash taxes
and expending sustaining capital, that could be used for
discretionary purposes such as common stock dividends, stock
repurchases, retirement of debt, or expansion capital expenditures.
We believe the GAAP measure most directly comparable to DCF is net
income available to common stockholders. A reconciliation of net
income available to common stockholders to DCF is provided herein.
DCF per share is DCF divided by average outstanding shares,
including restricted stock awards that participate in
dividends.
Segment EBDA before Certain Items
is used by management in its analysis of segment performance and
management of our business. General and administrative expenses are
generally not under the control of our segment operating managers,
and therefore, are not included when we measure business segment
operating performance. We believe Segment EBDA before Certain Items
is a significant performance metric because it provides us and
external users of our financial statements additional insight into
the ability of our segments to generate segment cash earnings on an
ongoing basis. We believe it is useful to investors because it is a
measure that management uses to allocate resources to our segments
and assess each segment’s performance. We believe the GAAP measure
most directly comparable to Segment EBDA before Certain Items is
segment earnings before DD&A and amortization of excess cost of
equity investments (Segment EBDA). Segment EBDA before Certain
Items is calculated by adjusting Segment EBDA for the Certain Items
attributable to a segment, which are specifically identified in the
footnotes to the accompanying tables.
Adjusted EBITDA is calculated by
adjusting net income before interest expense, taxes, and DD&A
(EBITDA) for Certain Items, noncontrolling interests before Certain
Items, and KMI’s share of certain equity investees’ DD&A (net
of consolidating joint venture partners’ share of DD&A) and
book taxes, which are specifically identified in the footnotes to
the accompanying tables.. Adjusted EBITDA is used by management and
external users, in conjunction with our net debt, to evaluate
certain leverage metrics. Therefore, we believe Adjusted EBITDA is
useful to investors. We believe the GAAP measure most directly
comparable to Adjusted EBITDA is net income.
Adjusted Earnings is net income
available to common stockholders before Certain Items. Adjusted
Earnings is used by certain external users of our financial
statements to assess the earnings of our business excluding Certain
Items as another reflection of our business’s ability to generate
earnings. We believe the GAAP measure most directly comparable to
Adjusted Earnings is net income available to common stockholders.
Adjusted Earnings per share uses Adjusted Earnings and applies the
same two-class method used in arriving at Basic Earnings Per Common
Share.
Our non-GAAP measures described above should not be considered
alternatives to GAAP net income or other GAAP measures and have
important limitations as analytical tools. Our computations of DCF,
Segment EBDA before Certain Items and Adjusted EBITDA may differ
from similarly titled measures used by others. You should not
consider these non-GAAP measures in isolation or as substitutes for
an analysis of our results as reported under GAAP. DCF should not
be used as an alternative to net cash provided by operating
activities computed under GAAP. Management compensates for the
limitations of these non-GAAP measures by reviewing our comparable
GAAP measures, understanding the differences between the measures
and taking this information into account in its analysis and its
decision making processes.
Important Information Relating to
Forward-Looking Statements
This news release includes forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995 and Section 21E of the Securities and Exchange Act of 1934.
Generally the words “expects,” “believes,” anticipates,” “plans,”
“will,” “shall,” “estimates,” and similar expressions identify
forward-looking statements, which are generally not historical in
nature. Forward-looking statements are subject to risks and
uncertainties and are based on the beliefs and assumptions of
management, based on information currently available to them.
Although KMI believes that these forward-looking statements are
based on reasonable assumptions, it can give no assurance that any
such forward-looking statements will materialize. Important factors
that could cause actual results to differ materially from those
expressed in or implied 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, 2017 (under the
headings “Risk Factors” and “Information Regarding Forward-Looking
Statements” and elsewhere) and its subsequent reports, which are
available through the SEC’s EDGAR system at www.sec.gov and on our
website at ir.kindermorgan.com. Forward-looking statements speak
only as of the date they were made, and except to the extent
required by law, KMI undertakes no obligation to update any
forward-looking statement because of new information, future events
or other factors. Because of these risks and uncertainties, readers
should not place undue reliance on these forward-looking
statements.
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Statements of
Income
(Unaudited)
(In millions, except per share
amounts)
Three Months Ended March
31,
2018 2017 Revenues $ 3,418 $
3,424 Costs, expenses and other Costs of sales 1,019
1,061 Operations and maintenance 619 533 Depreciation, depletion
and amortization 570 558 General and administrative 173 184 Taxes,
other than income taxes 88 104 Other expense, net —
7 2,469 2,447 Operating
income 949 977 Other income (expense) Earnings from equity
investments 220 175 Amortization of excess cost of equity
investments (32 ) (15 ) Interest, net (467 ) (465 ) Other, net
36 19 Income before income taxes
706 691 Income tax expense (164 ) (246 )
Net income 542 445 Net income attributable to
noncontrolling interests (18 ) (5 ) Net income
attributable to Kinder Morgan, Inc. 524 440 Preferred stock
dividends (39 ) (39 )
Net income available
to common stockholders $ 485 $
401 Class P Shares Basic and diluted
earnings per common share $ 0.22 $ 0.18 Basic
and diluted weighted average common shares outstanding 2,207
2,230
Declared dividend per common
share $ 0.20 $ 0.125
Adjusted earnings per common share (1) $
0.22 $ 0.17 Segment
EBDA % change Natural Gas Pipelines $ 1,136 $ 1,055 8 %
CO2 199 218 (9 )% Terminals 295 307 (4 )% Products Pipelines 259
287 (10 )% Kinder Morgan Canada 46 43 7
%
Total Segment EBDA $ 1,935 $
1,910 1 %
Note
(1) Adjusted earnings per common share uses adjusted
earnings and applies the same two-class method used in arriving at
diluted earnings per common share. See the following page,
Preliminary Earnings Contribution by Business Segment, for a
reconciliation of net income available to common stockholders to
adjusted earnings.
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Earnings Contribution by
Business Segment
(Unaudited)
(In millions, except per share
amounts)
Three Months Ended March
31,
2018 2017 %
change Segment EBDA before certain items (1) Natural Gas
Pipelines $ 1,082 $ 1,019 6 % CO2 237 222 7 % Terminals 296 302 (2
)% Product Pipelines 290 287 1 % Kinder Morgan Canada 46 43
7 % Subtotal 1,951 1,873 4 % DD&A and
amortization of excess investments (602 ) (573 ) General and
administrative and corporate charges (1) (2) (164 ) (174 )
Interest, net (1) (472 ) (477 ) Subtotal 713 649
Book taxes (1) (167 ) (234 ) Certain items Acquisition and
divestiture related costs — (6 ) Fair value amortization 11 17
Contract early termination (3) — 22 Legal and environmental
reserves (4) (37 ) (2 ) Change in fair market value of derivative
contracts (5) (40 ) 6 Losses on impairments and divestitures, net —
(5 ) Hurricane damage (3 ) — Release of sales and use tax reserves
18 — Other — 10
Subtotal certain items before tax
(51 ) 42 Book tax certain items 3 (12 ) Impact of 2017 Tax Cuts and
Jobs Act 44 — Total certain items (4 ) 30 Net
income 542 445 Net income attributable to noncontrolling interests
(18 ) (5 ) Preferred stock dividends (39 ) (39 )
Net income
available to common stockholders $ 485
$ 401 Net income available to common
stockholders $ 485 $ 401 Total certain items 4 (30 )
Adjusted earnings 489 371 DD&A and amortization of excess
investments (6) 690 671 Total book taxes (7) 184 261 Cash taxes (8)
(13 ) 3 Other items (9) 11 13 Sustaining capital expenditures (10)
(114 ) (104 )
DCF $ 1,247 $
1,215 Weighted average common shares
outstanding for dividends (11) 2,218 2,239 DCF per common
share $ 0.56 $ 0.54 Declared dividend per common share $ 0.20 $
0.125 Adjusted EBITDA (12) $ 1,902 $ 1,820
Notes ($
million)
(1) Excludes certain items: 1Q 2018 - Natural Gas
Pipelines $54, CO2 $(38), Terminals $(1), Products Pipelines $(31),
general and administrative and corporate charges $4, interest
expense $5, book tax $3. 1Q 2017 - Natural Gas Pipelines $36, CO2
$(4), Terminals $5, general and administrative and corporate
charges $(7), interest expense $12, book tax $(12).
(2)
Includes corporate (benefit) charges: 1Q 2018 - $(13) 1Q 2017 - $6
General and administrative expense is also net of management fee
revenues from an equity investee: 1Q 2017 - $(9)
(3)
Comprised of earnings recognized related to the early termination
of customer contracts, including earnings from the sale of a
contract termination claim related to a customer bankruptcy.
(4) Legal reserve adjustments related to certain litigation
and environmental matters.
(5) Gains or losses are reflected
in our DCF when realized.
(6) Includes KMI's share of
certain equity investees' DD&A, net of the noncontrolling
interests' portion of KML DD&A and consolidating joint venture
partners' share of DD&A: 1Q 2018 - $88 1Q 2017 - $98
(7)
Excludes book tax certain items. Also, includes KMI's share of
taxable equity investees' book taxes, net of the noncontrolling
interests' portion of KML book taxes: 1Q 2018 - $17 1Q 2017 - $27
(8) Includes KMI's share of taxable equity investees' cash
taxes: 1Q 2018 - $(10)
(9) Includes non-cash compensation
associated with our restricted stock program.
(10) Includes
KMI's share of certain equity investees' sustaining capital
expenditures (the same equity investees for which DD&A is added
back): 1Q 2018 - $(16) 1Q 2017 - $(18)
(11) Includes
restricted stock awards that participate in common share dividends.
(12) Net income is reconciled to Adjusted EBITDA as follows,
with any difference due to rounding:
Three Months Ended
March 31, 2018 2017 Net income $ 542 $ 445
Total certain items 4 (30 ) Net income attributable to
noncontrolling interests before certain items (13) (4 ) (5 )
DD&A and amortization of excess investments (6) (14) 700 671
Book taxes (7) (14) 188 262 Interest, net (1) 472 477
Adjusted EBITDA $ 1,902 $ 1,820
(13)
Excludes KML noncontrolling interests: 1Q 2018 - $14
(14)
Includes the noncontrolling interests' portion of KML: 1Q 2018 -
DD&A $9; Book taxes $4
Volume Highlights
(historical pro forma for acquired and
divested assets)
Three Months EndedMarch
31,
2018 2017 Natural Gas Pipelines
Transport Volumes (BBtu/d) (1) 32,124 29,326 Sales Volumes (BBtu/d)
(2) 2,491 2,563 Gas Gathering Volumes (BBtu/d) (3) 2,731 2,712
Crude/Condensate Gathering Volumes (MBbl/d) (4) 281 272 CO2
Southwest Colorado Production - Gross (Bcf/d) (5) 1.25 1.34
Southwest Colorado Production - Net (Bcf/d) (5) 0.58 0.66 Sacroc
Oil Production - Gross (MBbl/d) (6) 29.54 28.30 Sacroc Oil
Production - Net (MBbl/d) (7) 24.61 23.58 Yates Oil Production -
Gross (MBbl/d) (6) 17.00 17.87 Yates Oil Production - Net (MBbl/d)
(7) 7.73 8.00 Katz, Goldsmith, and Tall Cotton Oil Production -
Gross (MBbl/d) (6) 8.59 7.29 Katz, Goldsmith, and Tall Cotton Oil
Production - Net (MBbl/d) (7) 7.30 6.18 NGL Sales Volumes (MBbl/d)
(8) 10.16 10.16 Realized Weighted Average Oil Price per Bbl (9) $
59.72 $ 58.14 Realized Weighted Average NGL Price per Bbl $ 30.39 $
24.50 Terminals Liquids Leasable Capacity (MMBbl) 88.8 85.8
Liquids Utilization % 91.0 % 95.2 % Bulk Transload Tonnage (MMtons)
(10) 14.4 14.4 Ethanol (MMBbl) 14.8 17.7 Products Pipelines
Pacific, Calnev, and CFPL (MBbl/d) Gasoline (11) 766 767 Diesel 278
274 Jet Fuel 258 251 Sub-Total Refined Product
Volumes - excl. Plantation 1,302 1,292 Plantation (MBbl/d) (12)
Gasoline 213 225 Diesel 63 49 Jet Fuel 31 34
Sub-Total Refined Product Volumes - Plantation 307 308 Total
(MBbl/d) Gasoline (11) 979 992 Diesel 341 323 Jet Fuel 289
285 Total Refined Product Volumes 1,609 1,600 NGLs (MBbl/d)
(13) 116 106 Crude and Condensate (MBbl/d) (14) 329 348
Total Delivery Volumes (MBbl/d) 2,054 2,054 Ethanol (MBbl/d)
(15) 120 110 Trans Mountain (MMBbl/d - mainline throughput)
288 307
Notes
(1) Includes Texas Intrastates, Copano South Texas, KMNTP,
Monterrey, TransColorado, MEP, KMLA, FEP, TGP, EPNG, CIG, WIC,
Cheyenne Plains, SNG, Elba Express, Ruby, Sierrita, NGPL, and
Citrus pipeline volumes. Joint Venture throughput reported at KMI
share. (2) Includes Texas Intrastates and KMNTP. (3) Includes
Copano Oklahoma, Copano South Texas, Eagle Ford Gathering, Copano,
North Texas, Altamont, KinderHawk, Camino Real, Endeavor, Bighorn,
Webb/Duval Gatherers, Fort Union, EagleHawk, Red Cedar, and Hiland
Midstream throughput. Joint Venture throughput reported at KMI
share. (4) Includes Hiland Midstream, EagleHawk, and Camino Real.
Joint Venture throughput reported at KMI share. (5) Includes McElmo
Dome and Doe Canyon sales volumes. (6) Represents 100% production
from the field. (7) Represents KMI's net share of the production
from the field. (8) Net to KMI. (9) Includes all KMI crude oil
properties. (10) Includes KMI's share of Joint Venture tonnage.
(11) Gasoline volumes include ethanol pipeline volumes. (12)
Plantation reported at KMI share. (13) Includes Cochin, Utopia (KMI
share), and Cypress (KMI share). (14) Includes KMCC, Double Eagle
(KMI share), and Double H. (15) Total ethanol handled including
pipeline volumes included in gasoline volumes above.
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Balance
Sheets
(Unaudited)
(In millions)
March 31, December 31,
2018 2017 ASSETS Cash and cash equivalents $
294 $ 264 Other current assets 2,334 2,451 Property, plant and
equipment, net 40,333 40,155 Investments 7,420 7,298 Goodwill
22,157 22,162 Deferred charges and other assets 6,473 6,725
TOTAL ASSETS $ 79,011 $
79,055 LIABILITIES, REDEEMABLE
NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
Liabilities Short-term debt $ 2,494 $ 2,828 Other current
liabilities 2,935 3,353 Long-term debt 34,723 33,988 Preferred
interest in general partner of KMP 100 100 Debt fair value
adjustments 720 927 Other 2,381 2,735 Total
liabilities 43,353 43,931
Redeemable
Noncontrolling Interest 523 —
Shareholders’ Equity Other shareholders' equity 34,334
34,177 Accumulated other comprehensive loss (667 ) (541 ) KMI
equity 33,667 33,636 Noncontrolling interests 1,468 1,488
Total shareholders' equity 35,135 35,124
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND
SHAREHOLDERS' EQUITY $ 79,011 $
79,055 Net Debt (1) $
36,740 $ 36,409 Net Debt including 50% of
KML preferred shares (2) 36,955 36,624
Adjusted EBITDATwelve Months
Ended
March 31, December 31, Reconciliation of Net
Income to Adjusted EBITDA 2018 2017 Net income $
320 $ 223 Total certain items 1,479 1,445 Net income attributable
to noncontrolling interests before certain items (3) (11 ) (12 )
DD&A and amortization of excess investments (4) 2,732 2,704
Income tax expense before certain items (5) 894 967 Interest, net
before certain items 1,866 1,871
Adjusted
EBITDA $ 7,280 $ 7,198
Net Debt including 50% of KML preferred shares to
Adjusted EBITDA 5.1 5.1
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 $183
million and $143 million as of March 31, 2018 and December 31,
2017, respectively, as we have entered into swaps to convert that
debt to U.S.$. (2) March 31, 2018 and December 31, 2017 amounts
include $215 million for each year, representing 50% of KML
preferred shares which is included in noncontrolling interests. (3)
2018 and 2017 amounts exclude KML noncontrolling interests of $41
million and $27 million, respectively. (4) 2018 and 2017 amounts
include KMI's share of certain equity investees' DD&A of $381
million and $382 million, respectively. (5) 2018 and 2017 amounts
include KMI's share of taxable equity investees' book taxes of $108
million and $114 million, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180418006117/en/
Kinder Morgan, Inc.Media RelationsDave Conover, (713)
369-9407dave_conover@kindermorgan.comorInvestor Relations(800)
348-7320km_ir@kindermorgan.comwww.kindermorgan.com
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