Kinder Morgan, Inc.’s (NYSE: KMI) board of directors today
approved a cash dividend of $0.2625 per share for the third quarter
($1.05 annualized), payable on November 16, 2020, to common
stockholders of record as of the close of business on November 2,
2020. This dividend represents a 5% increase over the third quarter
of 2019.
KMI is reporting third quarter net income attributable to KMI of
$455 million, compared to net income attributable to KMI of $506
million in the third quarter of 2019; and distributable cash flow
(DCF) of $1,085 million, a 5% decrease from the third quarter of
2019.
“We are now in the seventh month of an unprecedented reduction
in energy demand due to the pandemic,” said KMI Executive Chairman
Richard D. Kinder. “Yet our company continued to produce
considerable earnings and robust coverage of this quarter’s
dividend.
“We generate substantial cash and we remain committed to funding
our capital needs internally, maintaining a healthy balance sheet
and returning excess cash to our shareholders through dividend
increases and/or share repurchases. Once we have completed our 2021
budget process, the board will determine the fourth quarter 2020
dividend and our dividend policy for 2021,” Kinder concluded.
“We are very proud of how our team has performed during this
challenging time. Essential workers in the field have adapted to
new practices and procedures designed to keep everyone safe and
healthy as we maintain our assets and execute on projects.
Thousands of office workers have adapted to new working conditions
as we continue to serve our customers and generate new business,”
said KMI Chief Executive Officer Steve Kean. “Our continued success
is key to providing services that are vital for the country and the
world’s economy — and for the quality of life for millions of our
fellow citizens.
“We have also maintained our vigilance with respect to capital
spending, expenses, and increased operational efficiency. We have
reduced our 2020 expenses and sustaining capital expenditures by
approximately $175 million combined versus our original budget
without sacrificing safety and compliance. That figure is net of
more than $12 million that we will spend on personal protective
equipment, enhanced cleaning protocols, temperature screening, and
other measures we adopted to protect our colleagues. And we reduced
our expansion capital outlook for 2020 by approximately $680
million, or almost 30%,” continued Kean.
“Finally, and as I noted last quarter, the actions we took over
the last several years to strengthen our balance sheet, including
reducing our net debt by $10 billion since the third quarter of
2015, have increased our resiliency for these challenging times,”
Kean concluded.
“Despite the on-going headwinds facing the energy sector
overall, including continued low crude oil and natural gas
production and reduced demand for refined products, we generated
third quarter earnings per common share of $0.20, compared to
earnings per common share of $0.22 in the third quarter of 2019,”
said KMI President Kim Dang. “Financial contributions from our
Products Pipelines and Terminals business segments were down
compared to the third quarter of 2019, primarily due to lower
refined products volumes as a result of the pandemic and the
December 2019 sale of Kinder Morgan Canada Limited (KML). This was
somewhat offset by lower interest expense versus the same period
last year.
“Adjusted earnings per share in the third quarter of 2020 were
down 5% compared to the third quarter of 2019. At $0.48 per common
share, DCF per share was down $0.02 from the third quarter of 2019,
reflecting the items above as well as higher cash taxes due to
deferrals from the second quarter of 2020. We also achieved $487
million of excess DCF above our declared dividend.
“Our project management team made excellent progress this
quarter on the Permian Highway Pipeline project, with the project
standing at more than 97% mechanically complete. As previously
announced, we expect the project to be in service early in 2021,”
said Dang. “We also completed the Elba Liquefaction project, and
the facility is fully in-service. Both projects are contracted
under long term, reservation-based contracts.”
2020 Outlook
For 2020, KMI’s original budget contemplated DCF of
approximately $5.1 billion ($2.24 per common share) and Adjusted
EBITDA of approximately $7.6 billion. Because of the
pandemic-related reduced energy demand and the sharp decline in
commodity prices, the company expects DCF to be below plan by
slightly more than 10% and Adjusted EBITDA to be below plan by
slightly more than 8%. As a result, KMI expects to end 2020 with a
Net Debt-to-Adjusted EBITDA ratio of approximately 4.6 times.
Market conditions also negatively impacted a number of planned
expansion projects such that they are not needed at this time or no
longer meet our internal return thresholds. We therefore expect the
budgeted $2.4 billion of expansion projects and contributions to
joint ventures for 2020 to be lower by approximately $680 million.
With this reduction, DCF less expansion capital expenditures is
improved by approximately $135 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.
As of September 30, 2020, we had over $3.9 billion of borrowing
capacity under our $4 billion credit facility and $632 million in
cash and cash equivalents. We believe this borrowing capacity,
current cash on hand, and our cash from operations are more than
adequate to allow us to manage our cash requirements, including
maturing debt, through 2021.
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.
Overview of Business
Segments
“The Natural Gas Pipelines segment’s financial
performance was slightly down for the third quarter of 2020
relative to the third quarter of 2019,” said Dang. “The segment
experienced lower contributions from multiple gathering and
processing assets due to sharply reduced natural gas production,
and from the sale of the Cochin Pipeline in December 2019. These
reduced contributions were partially offset by greater
contributions from the Elba Liquefaction and the Gulf Coast Express
(GCX) projects.”
Natural gas transport volumes were down 2% compared to the third
quarter of 2019, with notable volume declines on Kinder Morgan
Louisiana Pipeline (KMLP) and Natural Gas Pipeline of America
(NGPL) due to lower LNG demand; Ruby Pipeline, due to competition
from deliveries from Canada; and Wyoming Interstate Company (WIC),
due to Rockies basin production declines. These declines were
partially offset by a full quarter of GCX volumes. Natural gas
gathering volumes were down 13% from the third quarter of 2019
across nearly all our systems, most notably on the KinderHawk
system.
“Continued low refined product demand and lower crude and
condensate volumes during the third quarter reduced contributions
from the Products Pipelines segment,” Dang said. “Crude and
condensate pipeline volumes were down 17% and total refined product
volumes were down 16% compared to the third quarter of 2019. This
performance represents an improvement over the second quarter of
2020 as we saw some recovery in this sector.”
“Terminals segment earnings were lower compared to the
third quarter of 2019 predominantly driven by the impacts of the
December 2019 sale of Kinder Morgan Canada Limited (KML) and demand
reduction attributable to the pandemic. In our liquids business,
which accounts for approximately 80% of the segment, refined
product volumes were down 22% compared to the third quarter of
2019, although our predominantly fixed, take-or-pay contracting
profile mitigated the negative impact to earnings. Further, storage
demand has remained elevated, contributing to historically-high
effective utilization across our network of nearly 80 million
barrels of storage capacity,” said Dang. “Our bulk business was
impacted by weakness in petroleum coke and coal volumes.
“CO2 segment earnings were down slightly due to
mark-to-market adjustments on hedge contracts. Excluding this
impact, the segment was up slightly versus the third quarter of
2019 primarily due to lower operating expenditures and higher
realized crude prices, mostly offset by lower CO2 and crude
volumes. Our realized weighted average crude oil price for the
quarter was up 11% at $54.83 per barrel compared to $49.45 per
barrel for the third quarter of 2019, largely driven by our
Midland/Cushing basis hedges,” said Dang. “Third quarter 2020
combined oil production across all of our fields was down 12%
compared to the same period in 2019 on a net to KMI basis and CO2
volumes were down 33%.”
Other News
Corporate
- In August 2020, KMI issued $750 million in 2% senior notes due
2031 and $500 million in 3.25% senior notes due 2050. These coupon
rates were the lowest ever achieved on KMI 10-year and 30-year
issuances, respectively. The proceeds were used to repay $949
million of maturing senior notes in September 2020 and to prefund
early 2021 debt maturities.
Natural Gas Pipelines
- The Permian Highway Pipeline (PHP) is more than 97%
mechanically complete and is on schedule to be placed in service in
early first quarter 2021. The approximately $2 billion project is
designed to transport up to 2.1 billion cubic feet per day (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. The
project is fully subscribed under long-term, firm transportation
agreements. Kinder Morgan Texas Pipeline (KMTP), EagleClaw
Midstream and Altus Midstream each hold an ownership interest of
approximately 26.7%, and an affiliate of an anchor shipper has a
20% interest. KMTP is building and will operate the pipeline.
- Construction activities are expected to be completed during the
fourth quarter of 2020 on KMI’s approximately $260 million
expansion project designed to increase the delivery capacity by 1.4
Bcf/d on its Texas intrastate system. This expansion capacity will
serve future LNG, industrial, electric generation and local
distribution company expansions along the Texas Gulf Coast.
- Kinder Morgan received significant customer commitments through
a recent open season and is moving forward with its Mier-Monterrey
Pipeline system expansion project serving Mexico. The approximately
$22 million project involves expanding the system’s existing
capacity by 35 million cubic feet per day (MMcf/d) and is supported
by long term take or pay contracts. The project is expected to be
in service in the third quarter of 2021.
- Elba Liquefaction Company (ELC) completed the commissioning and
startup activities on the remaining liquefaction units of the Elba
Liquefaction project on August 27, 2020. Now fully in-service, the
facility has a total liquefaction capacity of approximately 2.5
million metric tons per year of LNG, equivalent to approximately
350 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% partner, owns the
liquefaction units and other ancillary equipment. Other facilities
associated with the project are 100% owned by KMI.
- KMLP received a Federal Energy Regulatory Commission
certificate order on September 17, 2020, authorizing its
approximately $145 million Acadiana expansion project to provide
945,000 Dth/d of capacity to serve Train 6 at Cheniere’s Sabine
Pass Liquefaction facility in Cameron Parish, Louisiana. The KMLP
project is anticipated to be placed into commercial service as
early as the first quarter of 2022.
- Construction is complete on NGPL’s Sabine Pass Compression
Project, which was placed in service on October 1, 2020. The
approximately $68 million project (KMI’s share: approximately $34
million), supported by a long-term take-or-pay contract, adds
compression capacity on NGPL’s Louisiana system in order to deliver
additional natural gas to the Sabine Pass Liquefaction
facility.
- Construction is progressing on NGPL’s Gulf Coast Southbound
project. The approximately $203 million project (KMI’s share:
$101.5 million) will increase southbound capacity on NGPL’s Gulf
Coast System by approximately 300,000 dekatherms per day (Dth/d) to
serve Cheniere’s Corpus Christi Liquefaction facility in San
Patricio County, Texas. The project is supported by a long-term
take-or-pay contract and is expected to be placed into service the
first quarter of 2021.
- Construction is complete on NGPL’s approximately $51 million
Lockridge to Waha Project (KMI’s share: $25.5 million), which was
placed in service on September 18, 2020. The project enables 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.
Terminals
- Kinder Morgan has completed and placed in service the final
elements in a series of projects at the Pasadena Terminal and
Jefferson Street Truck Rack located on the Houston Ship Channel.
The projects, totaling approximately $134 million and supported by
long-term agreements, included increasing flow rates on inbound
pipeline connections and outbound dock lines, tank modifications
that added 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.
- Construction activities continue on the butane-on-demand
blending system at KMI’s Galena Park Terminal. The approximately
$52 million project includes 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 is substantially complete 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 $18 million project
improves the system’s inbound and outbound modal balances, adding
greater product-clearing efficiencies to this industry-critical
pricing and liquidity hub.
- Construction is nearing completion on a facility upgrade at the
Battleground Oil Specialty Terminal Company LLC (BOSTCO) terminal,
a leading fuel oil storage terminal on the Houston Ship Channel.
The approximately $20 million project, which is expected to be
placed in service in the fourth quarter of 2020, will add piping to
allow for segregation of high sulfur and low sulfur fuel oils. KMI
owns a 55% interest in and is the operator of BOSTCO.
CO2
- The CO2 segment continues to efficiently execute approved
projects and generate economic production. Ongoing capital
discipline and cost management practices have increased CO2 segment
Free Cash Flow as compared to its 2020 budget.
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, October 21, at www.kindermorgan.com for a LIVE webcast conference
call on the company’s third 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),
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; 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 (loss) 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 (loss), 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). We also
include adjustments related to joint ventures (see “Amounts from Joint Ventures” below and the
accompanying Tables 4 and 7.)
Adjusted Earnings is calculated by
adjusting net income (loss) 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 (loss)
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
income (loss) 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. We also include
amounts from joint ventures for income taxes, DD&A and
sustaining capital expenditures (see “Amounts
from Joint Ventures” below). 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 (loss) to Kinder Morgan, Inc. DCF
per common share is DCF divided by average outstanding common
shares, including restricted stock awards that participate in
common share 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,
DD&A, and amortization of excess cost of equity investments
(EBITDA) for Certain Items. We also include amounts from joint
ventures for income taxes and DD&A (see “Amounts from Joint Ventures” below). 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 (loss) income. (See the accompanying
Tables 3 and 4.)
Amounts from Joint Ventures -
Certain Items, DCF and Adjusted EBITDA reflect amounts from
unconsolidated joint ventures (JVs) and consolidated JVs utilizing
the same recognition and measurement methods used to record
“Earnings from equity investments” and “Noncontrolling interests,”
respectively. The calculations of DCF and Adjusted EBITDA related
to our unconsolidated and consolidated JVs include the same items
(DD&A and income tax expense, and for DCF only, also cash taxes
and sustaining capital expenditures) with respect to the JVs as
those included in the calculations of DCF and Adjusted EBITDA for
our wholly-owned consolidated subsidiaries. (See Table 7,
Additional JV Information.) Although these amounts related to our
unconsolidated JVs are included in the calculations of DCF and
Adjusted EBITDA, such inclusion should not be understood to imply
that we have control over the operations and resulting revenues,
expenses or cash flows of such unconsolidated JVs. DCF and Adjusted
EBITDA are further adjusted for certain KML activities attributable
to our noncontrolling interests in KML for the periods presented
through KML’s sale on December 16, 2019 (See Table 7, KML
Activities Prior to December 16, 2019.)
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. Net Debt is a non-GAAP financial measure that management
believes is useful to investors and other users of our financial
information in evaluating our leverage. 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.
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 and its
Quarterly Report on Form 10-Q for the quarter ended March 31, 2020
(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 Operations
(In millions, except per share
amounts, unaudited)
Three Months Ended September
30,
% change
Nine Months Ended September
30,
% change
2020
2019
2020
2019
Revenues
$
2,919
$
3,214
$
8,585
$
9,857
Operating costs, expenses and other
Costs of sales
655
762
1,759
2,487
Operations and maintenance
643
668
1,869
1,912
Depreciation, depletion and
amortization
539
578
1,636
1,750
General and administrative
153
154
461
456
Taxes, other than income taxes
100
103
295
324
Loss (gain) on impairments and
divestitures, net
11
(3
)
1,987
(13
)
Other (income) expense, net
(1
)
1
(2
)
(1
)
Total operating costs, expenses and
other
2,100
2,263
8,005
6,915
Operating income
819
951
580
2,942
Other income (expense)
Earnings from equity investments
194
173
562
526
Amortization of excess cost of equity
investments
(32
)
(21
)
(99
)
(61
)
Interest, net
(383
)
(447
)
(1,214
)
(1,359
)
Other, net
14
12
32
35
Income (loss) before income taxes
612
668
(139
)
2,083
Income tax expense
(140
)
(151
)
(304
)
(471
)
Net income (loss)
472
517
(443
)
1,612
Net income attributable to NCI
(17
)
(11
)
(45
)
(32
)
Net income (loss) attributable to
Kinder Morgan, Inc.
$
455
$
506
(488
)
1,580
Class P Shares
Basic and diluted earnings (loss) per
common share
$
0.20
$
0.22
(9
)
%
$
(0.22
)
$
0.69
(132
)
%
Basic and diluted weighted average common
shares outstanding
2,263
2,264
—
%
2,263
2,263
—
%
Declared dividends per common share
$
0.2625
$
0.25
5
%
$
0.7875
$
0.75
5
%
Adjusted Earnings (1)
$
485
$
508
(5
)
%
$
1,407
$
1,572
(10
)
%
Adjusted Earnings per common share (1)
$
0.21
$
0.22
(5
)
%
$
0.62
$
0.69
(10
)
%
Note
(1)
Adjusted Earnings is Net income (loss)
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
earnings (loss) per common share.
Table 2
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Net Income (Loss)
Attributable to Kinder Morgan, Inc. to Adjusted Earnings to DCF
Reconciliation
(In millions,
unaudited)
Three Months Ended September
30,
% change
Nine Months Ended September
30,
% change
2020
2019
2020
2019
Net income (loss) attributable to Kinder
Morgan, Inc. (GAAP)
$
455
$
506
$
(488
)
$
1,580
Total Certain Items
30
2
1,895
(8
)
Adjusted Earnings (1)
485
508
(5)
%
1,407
1,572
(10)
%
DD&A and amortization of excess cost
of equity investments for DCF (2)
662
694
2,012
2,093
Income tax expense for DCF (1)(2)
171
164
484
521
Cash taxes (3)
(49
)
(12
)
(57
)
(76
)
Sustaining capital expenditures (3)
(177
)
(173
)
(477
)
(477
)
Other items (4)
(7
)
(41
)
(22
)
6
DCF
$
1,085
$
1,140
(5)
%
$
3,347
$
3,639
(8)
%
Table 3
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Adjusted Segment
EBDA, Adjusted EBITDA and DCF
(In millions, except per share
amounts, unaudited)
Three Months Ended September
30,
% change
Nine Months Ended September
30,
% change
2020
2019
2020
2019
Natural Gas Pipelines
$
1,082
$
1,090
(1
)%
$
3,277
$
3,362
(3
)%
Products Pipelines
269
336
(20
)%
769
936
(18
)%
Terminals
246
295
(17
)%
732
884
(17
)%
CO2
154
149
3
%
485
522
(7
)%
Adjusted Segment EBDA (1)
1,751
1,870
(6
)%
5,263
5,704
(8
)%
General and administrative and corporate
charges (1)
(139
)
(157
)
(436
)
(467
)
JV DD&A and income tax expense
(1)(5)
114
123
343
368
Net income Attributable to NCI (net of KML
NCI and Certain Items) (1)
(17
)
(2
)
(45
)
(7
)
Adjusted EBITDA
1,709
1,834
(7
)%
5,125
5,598
(8
)%
Interest, net (1)
(391
)
(452
)
(1,222
)
(1,365
)
Cash taxes (3)
(49
)
(12
)
(57
)
(76
)
Sustaining capital expenditures (3)
(177
)
(173
)
(477
)
(477
)
KML NCI DCF adjustments (6)
—
(16
)
—
(47
)
Other items (4)
(7
)
(41
)
(22
)
6
DCF
$
1,085
$
1,140
(5
)%
$
3,347
$
3,639
(8
)%
Weighted average common shares outstanding
for dividends (7)
2,276
2,277
2,276
2,276
DCF per common share
$
0.48
$
0.50
$
1.47
$
1.60
Declared dividends per common share
$
0.2625
$
0.25
$
0.7875
$
0.75
Notes
(1)
Amounts are adjusted for Certain Items.
See Tables 4 and 7 for more information.
(2)
Includes DD&A or income tax expense,
as applicable, from unconsolidated JVs, reduced by consolidated JV
partners' DD&A. 2019 amounts are also net of DD&A or income
tax expense Attributable to KML NCI. See Table 7 for more
information.
(3)
Includes cash taxes or sustaining capital
expenditures, as applicable, from unconsolidated JVs, reduced by
consolidated JV partners' sustaining capital expenditures. See
Table 7 for more information.
(4)
Includes non-cash pension expense and
non-cash compensation associated with our restricted stock
program.
(5)
Represents unconsolidated JV DD&A and
income tax expense, reduced by consolidated JV partners' DD&A.
See Table 7 for more information.
(6)
2019 amounts represent the combined net
income, DD&A and income tax expense adjusted for Certain Items,
as applicable, Attributable to KML NCI. See Table 7 for more
information.
(7)
Includes restricted stock awards that
participate in common share dividends.
Table 4
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Net Income (Loss)
to Adjusted EBITDA Reconciliation
(In millions,
unaudited)
Three Months Ended September
30,
% change
Nine Months Ended September
30,
% change
2020
2019
2020
2019
Net income (loss) (GAAP)
$
472
$
517
(9
)%
$
(443
)
$
1,612
(127
)%
Certain Items:
Fair value amortization
(5
)
(7
)
(17
)
(22
)
Legal, environmental and taxes other than
income tax reserves
46
11
38
28
Change in fair value of derivative
contracts (1)
(6
)
(14
)
(10
)
(22
)
Loss (gain) on impairments and
divestitures, net (2)
11
—
382
(5
)
Loss on impairment of goodwill (3)
—
—
1,600
—
COVID-19 costs
11
—
11
—
Income tax Certain Items
(8
)
8
(114
)
15
NCI associated with Certain Items
—
—
—
(1
)
Other
(19
)
4
5
(1
)
Total Certain Items (4)
30
2
1,895
(8
)
DD&A and amortization of excess cost
of equity investments
571
599
1,735
1,811
Income tax expense (5)
148
143
418
456
JV DD&A and income tax expense
(5)(6)
114
123
343
368
Interest, net (5)
391
452
1,222
1,365
Net income attributable to NCI (net of KML
NCI (5))
(17
)
(2
)
(45
)
(6
)
Adjusted EBITDA
$
1,709
$
1,834
(7
)%
$
5,125
$
5,598
(8
)%
Notes
(1)
Gains or losses are reflected in our DCF
when realized.
(2)
Nine months ended September 30, 2020
amount 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 $21 million for asset impairments in
our Products Pipelines business segment, which are reported within
“Loss (gain) on impairments and divestitures, net” on the
accompanying Preliminary Consolidated Statement of Operations. (See
Table 1.)
(3)
Nine months ended September 30, 2020
amount includes non-cash impairments of goodwill of $1,000 million
and $600 million associated with our Natural Gas Pipelines
Non-regulated and CO2 reporting units, respectively.
(4)
Three months ended September 30, 2020 and
2019 amounts include $(4) million and $(2) million, respectively,
and nine months ended September 30, 2020 and 2019 amounts include
$(4) million and $(15) million, respectively, reported within
“Earnings from equity investments.”
(5)
Amounts are adjusted for Certain Items.
See Table 7 for more information.
(6)
Represents unconsolidated JV DD&A and
income tax expense, reduced by consolidated JV partners' DD&A.
See Table 7 for more information.
Table 5
Volume and CO2 Segment Hedges
Highlights
(Historical pro forma for
acquired and divested assets, JV volumes at KMI share)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Natural Gas Pipelines
Transport volumes (BBtu/d)
36,453
37,028
37,091
35,958
Sales volumes (BBtu/d)
2,382
2,647
2,330
2,435
Gathering volumes (BBtu/d)
2,925
3,380
3,109
3,335
NGLs (MBbl/d) (1)
22
33
27
32
Products Pipelines (MBbl/d)
Gasoline (2)
941
1,066
888
1,045
Diesel fuel
383
393
371
370
Jet fuel
160
318
184
305
Total refined product volumes
1,484
1,777
1,443
1,720
Crude and condensate
530
639
570
644
Total delivery volumes (MBbl/d)
2,014
2,416
2,013
2,364
Terminals (1)
Liquids leasable capacity (MMBbl)
79.4
79.5
79.4
79.5
Liquids utilization %
96.2
%
94.4
%
96.2
%
94.4
%
Bulk transload tonnage (MMtons)
11.3
14.1
35.4
42.0
CO2
SACROC oil production
21.19
23.24
22.14
24.03
Yates oil production
6.43
6.77
6.70
7.09
Katz and Goldsmith oil production
2.59
3.60
2.81
3.85
Tall Cotton oil production
1.37
2.10
1.87
2.36
Total oil production - net (MBbl/d)
(3)
31.58
35.71
33.52
37.33
NGL sales volumes - net (MBbl/d) (3)
9.06
10.16
9.43
10.21
CO2 sales volumes - net (Bcf/d)
0.39
0.58
0.45
0.61
Realized weighted average oil price per
Bbl
$
54.83
$
49.45
$
53.28
$
49.36
Realized weighted average NGL price per
Bbl
$
17.65
$
21.12
$
17.77
$
23.54
CO2 Segment Hedges
Remaining 2020
2021
2022
2023
2024
Crude Oil (4)
Price ($/barrel)
$
56.07
$
52.00
$
53.05
$
50.14
$
43.40
Volume (barrels per day)
30,684
20,300
8,600
5,150
950
NGLs
Price ($/barrel)
$
28.17
$
26.61
Volume (barrels per day)
6,315
2,474
Midland-to-Cushing Basis Spread
Price ($/barrel)
$
0.14
$
0.40
Volume (barrels per day)
31,100
1,500
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
(In millions,
unaudited)
September 30,
December 31,
2020
2019
Assets
Cash and cash equivalents
$
632
$
185
Other current assets
2,040
3,053
Property, plant and equipment, net
35,958
36,419
Investments
8,014
7,759
Goodwill
19,851
21,451
Deferred charges and other assets
5,326
5,290
Total assets
$
71,821
$
74,157
Liabilities, Redeemable Noncontrolling
Interest and Shareholders' Equity
Short-term debt
$
2,057
$
2,377
Preferred interest in general partner of
KMP
—
100
Other current liabilities
2,319
2,623
Long-term debt
31,281
30,883
Debt fair value adjustments
1,379
1,032
Other
2,093
2,253
Total liabilities
39,129
39,268
Redeemable Noncontrolling Interest
747
803
Other shareholders' equity
31,814
34,075
Accumulated other comprehensive loss
(255
)
(333
)
KMI equity
31,559
33,742
Noncontrolling interests
386
344
Total shareholders' equity
31,945
34,086
Total liabilities, redeemable
noncontrolling interest and shareholders' equity
$
71,821
$
74,157
Net Debt (1)
$
32,598
$
33,031
Adjusted EBITDA Twelve Months
Ended
September 30,
December 31,
Reconciliation of Net Income to
Adjusted EBITDA
2020
2019
Net income (GAAP)
$
184
$
2,239
Total Certain Items
1,874
(29
)
Net income attributable to NCI (net of KML
NCI) (2)
(56
)
(16
)
DD&A and amortization of excess cost
of equity investments
2,418
2,494
Income tax expense (3)
589
627
JV DD&A and income tax expense
(3)(4)
464
487
Interest, net (3)
1,673
1,816
Adjusted EBITDA
$
7,146
$
7,618
Net Debt to Adjusted EBITDA
4.6
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 $108 million and
$44 million as of September 30, 2020 and December 31, 2019,
respectively, as we have entered into swaps to convert that debt to
U.S.$.
(2)
2020 and 2019 amounts are net of KML NCI,
for periods through its December 16, 2019 sale, of $7 million and
$33 million, respectively.
(3)
Amounts are adjusted for Certain Items.
See Table 4 for more information.
(4)
Represents unconsolidated JV DD&A and
income tax expense, reduced by consolidated JV partners' DD&A.
See Table 7 for more information.
Table 7
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Supplemental
Information
(In millions,
unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Segment EBDA
Natural Gas Pipelines (GAAP)
$
1,091
$
1,092
$
2,284
$
3,383
Certain Items
(9
)
(2
)
993
(21
)
Natural Gas Pipelines Adjusted Segment
EBDA
1,082
1,090
3,277
3,362
Products Pipelines (GAAP)
223
325
719
908
Certain Items
46
11
50
28
Products Pipelines Adjusted Segment
EBDA
269
336
769
936
Terminals (GAAP)
246
295
732
884
Certain Items
—
—
—
—
Terminals Adjusted Segment EBDA
246
295
732
884
CO2 (GAAP)
156
164
(453
)
558
Certain Items
(2
)
(15
)
938
(36
)
CO2 Adjusted Segment EBDA
154
149
485
522
Kinder Morgan Canada (GAAP)
—
—
—
(2
)
Certain Items
—
—
—
2
Kinder Morgan Canada Adjusted Segment
EBDA
—
—
—
—
Total Segment EBDA (GAAP)
1,716
1,876
3,282
5,731
Total Segment EBDA Certain Items
35
(6
)
1,981
(27
)
Total Adjusted Segment EBDA
$
1,751
$
1,870
$
5,263
$
5,704
Depreciation, depletion and amortization
(GAAP)
$
(539
)
$
(578
)
$
(1,636
)
$
(1,750
)
Amortization of excess cost of equity
investments (GAAP)
(32
)
(21
)
(99
)
(61
)
DD&A and amortization of excess cost
of equity investments
(571
)
(599
)
(1,735
)
(1,811
)
JV DD&A
(91
)
(100
)
(277
)
(297
)
DD&A attributable to KML NCI
—
5
—
15
DD&A and amortization of excess cost
of equity investments for DCF
$
(662
)
$
(694
)
$
(2,012
)
$
(2,093
)
General and administrative (GAAP)
$
(153
)
$
(154
)
$
(461
)
$
(456
)
Corporate benefit (charges)
3
(8
)
(11
)
(22
)
Certain Items
11
5
36
11
General and administrative and corporate
charges (1)
$
(139
)
$
(157
)
$
(436
)
$
(467
)
Interest, net (GAAP)
$
(383
)
$
(447
)
$
(1,214
)
$
(1,359
)
Certain Items
(8
)
(5
)
(8
)
(6
)
Interest, net (1)
$
(391
)
$
(452
)
$
(1,222
)
$
(1,365
)
Income tax expense (GAAP)
$
(140
)
$
(151
)
$
(304
)
$
(471
)
Certain Items
(8
)
8
(114
)
15
Income tax expense (1)
(148
)
(143
)
(418
)
(456
)
Unconsolidated JV income tax expense
(1)
(23
)
(23
)
(66
)
(71
)
Income tax expense attributable to KML NCI
(1)
—
2
—
6
Income tax expense for DCF (1)
$
(171
)
$
(164
)
$
(484
)
$
(521
)
KML activities prior to December 16,
2019
Net income attributable to KML NCI
$
—
$
(9
)
$
—
$
(25
)
KML NCI associated with Certain Items
—
—
—
(1
)
KML NCI (1)
—
(9
)
—
(26
)
DD&A attributable to KML NCI
—
(5
)
—
(15
)
Income tax expense attributable to KML NCI
(1)
—
(2
)
—
(6
)
KML NCI DCF adjustments (1)
$
—
$
(16
)
$
—
$
(47
)
Net income attributable to NCI (GAAP)
$
(17
)
$
(11
)
$
(45
)
$
(32
)
Less: KML NCI (1)
—
(9
)
—
(26
)
Net income attributable to NCI (net of KML
NCI (1))
(17
)
(2
)
(45
)
(6
)
NCI associated with Certain Items
—
—
—
(1
)
Net income attributable to NCI (net of KML
NCI and Certain Items)
$
(17
)
$
(2
)
$
(45
)
$
(7
)
Additional JV information
Unconsolidated JV DD&A
$
(101
)
$
(104
)
$
(306
)
$
(308
)
Consolidated JV partners' DD&A
10
4
29
11
JV DD&A
(91
)
(100
)
(277
)
(297
)
Unconsolidated JV income tax expense
(1)
(23
)
(23
)
(66
)
(71
)
JV DD&A and income tax expense (1)
$
(114
)
$
(123
)
$
(343
)
$
(368
)
Unconsolidated JV cash taxes (2)
$
(41
)
$
(16
)
$
(51
)
$
(50
)
Unconsolidated JV sustaining capital
expenditures
$
(32
)
$
(35
)
$
(84
)
$
(85
)
Consolidated JV partners' sustaining
capital expenditures
2
2
4
5
JV sustaining capital expenditures
$
(30
)
$
(33
)
$
(80
)
$
(80
)
CO2 Segment EBDA (GAAP) to CO2 Segment
Free Cash Flow Reconciliation
CO2 Segment EBDA (GAAP)
$
156
$
164
$
(453
)
$
558
Certain Items:
Change in fair value of derivative
contracts
(2
)
(15
)
(12
)
(36
)
Loss on impairments
—
—
950
—
CO2 Segment Certain Items
(2
)
(15
)
938
(36
)
Capital expenditures (3)
(31
)
(91
)
(154
)
(261
)
CO2 Segment Free Cash Flow (1)
$
123
$
58
$
331
$
261
Notes
(1)
Amounts are adjusted for Certain
Items.
(2)
Amounts are associated with our Citrus,
NGPL and Plantation equity investments.
(3)
Includes sustaining and expansion capital
expenditures for our CO2 segment.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201021005872/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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