$1.15 dividend per share; $1.21 net income
attributable to KMI per share; and $8 billion Adjusted
EBITDA
Kinder Morgan, Inc. (NYSE: KMI) today announced its preliminary
2024 financial projections. “We expect 5% growth across the board
in 2024 in Adjusted EBITDA, distributable cash flow (DCF) and DCF
per share due to growth projects in all our business segments, but
most prominently in Natural Gas Pipelines and Energy Transition
Ventures, as well as from contract rate escalations in our Products
Pipelines and Terminals business segments,” said Kim Dang, KMI
Chief Executive Officer. “It is important to note that the
company’s budget does not include the recently announced
acquisition of NextEra Energy Partners’ STX Midstream assets which
we expect would have a positive impact on the metrics above.
“We are projecting an annualized dividend of $1.15 in 2024,
constituting the 7th year in a row in which we have increased our
dividend. No share repurchases are assumed in the budget, but we
will have substantial capacity to transact opportunistically as our
2024 Net Debt-to-Adjusted EBITDA ratio is forecast to be 3.8 times,
far below our long-term target of 4.5 times,” Dang concluded.
“We anticipate generating net income attributable to KMI per
share of $1.21, up 11% compared to our year-end 2023 forecast of
$1.09 per share, with Adjusted EBITDA up 5% from 2023 at $8
billion, compared to the 2023 forecast of $7.6 billion, and DCF of
$5 billion and DCF per share of $2.21, both up 5% from our 2023
forecast. Expected growth in DCF and DCF per share would have been
higher if not for increased sustaining capex driven by expanded
regulatory requirements,” said KMI President Tom Martin.
“We expect to continue benefiting from strong natural gas market
fundamentals driving growth on our existing natural gas
transportation, storage, and gathering and processing assets as
well as expansion opportunities. In addition, we anticipate
benefitting from increased rates in our refined products
businesses, demand for renewable diesel and renewable diesel
feedstocks, and demand for renewable natural gas,” Martin
concluded.
Below is a summary of KMI’s expectations for 2024:
- Generate $1.21 of net income attributable to KMI per share, up
11% versus our current 2023 forecast of $1.09.
- Generate $2.21 DCF per share, up 5% from the current forecast
for 2023.
- Generate $8.0 billion of Adjusted EBITDA, up 5% from the 2023
forecast.
- Invest $2.3 billion in discretionary capital expenditures
including expansion projects and contributions to joint
ventures.
- Return additional value to shareholders in 2024 through an
anticipated $1.15 per share dividend (annualized).
- End 2024 with a Net Debt-to-Adjusted EBITDA ratio of 3.8 times,
well below our long-term target of approximately 4.5 times.
- The expected $2.21 of DCF per share and the 3.8 times leverage
metric do not reflect the impact of possible opportunistic share
repurchases, which KMI will have substantial capacity to transact
on.
- The guidance does not include the acquisition of NextEra Energy
Partners’ STX Midstream assets. KMI has filed for approval pursuant
to Hart-Scott-Rodino and expects to close in the first quarter of
2024.
This press release includes DCF, in the aggregate and per share,
Adjusted EBITDA and Net Debt, all of which are non-GAAP financial
measures. For descriptions of these non-GAAP financial measures and
reconciliations to the most comparable measures prepared in
accordance with generally accepted accounting principles, please
see “Non-GAAP Financial Measures” below.
KMI’s expectations assume interest expense flat to 2023,
consistent with the forward curve, and average annual prices for
West Texas Intermediate (WTI) crude oil and Henry Hub natural gas
of $82 per barrel and $3.50 per MMBtu, respectively, consistent
with forward pricing during the budget process. The vast majority
of cash generated by KMI is fee-based and therefore is not directly
exposed to commodity prices. The primary area where KMI has
commodity price sensitivity is in its CO2 segment, where KMI hedges
the majority of its next 12 months of oil production to minimize
this sensitivity. For 2024, the company estimates that every $1 per
barrel change in the average WTI crude oil price impacts DCF by
approximately $8 million and each $0.10 per MMBtu change in the
price of natural gas impacts DCF by approximately $1 million.
The KMI board of directors has preliminarily reviewed the 2024
budget and will take formal action on it at the January board
meeting. Management will discuss the budget in detail during the
company’s annual investor day conference on January 24, 2024, in
Houston, Texas. The 2024 budget will be the standard by which KMI
measures its performance next year and will be a factor in
determining employee compensation. Kinder Morgan remains committed
to transparency and will continue to publish its budget on the
company’s website as presented at the investor day conference. An
investor presentation updated with a brief overview of the 2024
budget has been posted to the Investor Relations page of KMI’s
website.
About Kinder Morgan, Inc.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy
infrastructure companies in North America. Access to reliable,
affordable energy is a critical component for improving lives
around the world. We are committed to providing energy
transportation and storage services in a safe, efficient, and
environmentally responsible manner for the benefit of people,
communities and businesses we serve. We have an interest in or
operate approximately 82,000 miles of pipelines, 140 terminals, 700
billion cubic feet of working natural gas storage capacity and have
renewable natural gas generation capacity of approximately 5.4 Bcf
per year with an additional 1.5 Bcf in development. Our pipelines
transport natural gas, refined petroleum products, crude oil,
condensate, CO2, renewable fuels and other products, and our
terminals store and handle various commodities including gasoline,
diesel fuel, jet fuel, chemicals, metals, petroleum coke, and
ethanol and other renewable fuels and feedstocks. Learn more about
our work advancing energy solutions on the lower carbon initiatives
page at www.kindermorgan.com.
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
express or implied statements pertaining to KMI’s expectations for
2023 and 2024, including expected net income attributable to Kinder
Morgan, Inc., DCF (in each case in the aggregate and per share),
Adjusted EBITDA, Net Debt-to-Adjusted EBITDA ratios, anticipated
dividends, sustaining and discretionary capital expenditures, KMI’s
financing and capital allocation strategy, and the proposed
acquisition of STX Midstream, including the parties’ ability to
satisfy customary conditions to closing (such as with respect to
Hart-Scott-Rodino and any other required regulatory approvals) and
the anticipated timing and benefits to KMI’s business and
stockholders of the transaction. Forward-looking statements are
subject to risks and uncertainties and are based on the beliefs and
assumptions of management, based on information currently available
to them. Although KMI believes that these forward-looking
statements are based on reasonable assumptions, it can give no
assurance as to when or if any such forward-looking statements will
materialize nor their ultimate impact on our operations or
financial condition. Important factors that could cause actual
results to differ materially from those expressed in or implied by
these forward-looking statements include: the timing and extent of
changes in the supply of and demand for the products we transport
and handle; commodity prices; and the other 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, 2022 (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.
Non-GAAP Financial
Measures
Our non-GAAP financial measures described further below should
not be considered alternatives to GAAP net income attributable to
Kinder Morgan, Inc. 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 our consolidated non-GAAP financial measures by
reviewing our comparable GAAP measures identified in the
descriptions of consolidated non-GAAP measures below, 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 attributable to
Kinder Morgan, Inc., but typically either (1) do not have a cash
impact (for example, unsettled commodity hedges and asset
impairments), or (2) by their nature are separately identifiable
from our normal business operations and in most cases 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).
DCF is calculated by adjusting net
income attributable to Kinder Morgan, Inc. for Certain Items, and
further by DD&A, 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
used by management, investors and other external users of our
financial statements to evaluate our performance and to measure and
estimate the ability of our assets to generate economic earnings
after paying interest expense, paying cash taxes and expending
sustaining capital. DCF provides additional insight into the
specific costs associated with our assets in the current period and
facilitates period-to-period comparisons of our performance from
ongoing business activities. DCF is also used by us, investors, and
other external users to compare the performance of companies across
our industry. DCF per share serves as the primary financial
performance target for purposes of annual bonuses under our annual
incentive compensation program and for performance-based vesting of
equity compensation grants under our long-term incentive
compensation program. 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 attributable to Kinder Morgan, Inc. DCF per share is DCF
divided by average outstanding shares, including restricted stock
awards that participate in dividends.
Adjusted EBITDA is calculated by
adjusting net income attributable to Kinder Morgan, Inc. 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 (on a rolling 12-months
basis) is used by management, investors and other external users,
in conjunction with our Net Debt (as described further below), to
evaluate our leverage. Management and external users also use
Adjusted EBITDA as an important metric to compare the valuations of
companies across our industry. Our ratio of Net Debt-to-Adjusted
EBITDA is used as a supplemental performance target for purposes of
our annual incentive compensation program. We believe the GAAP
measure most directly comparable to Adjusted EBITDA is net income
attributable to Kinder Morgan, Inc.
Net Debt is calculated by
subtracting from debt (1) cash and cash equivalents, (2) debt fair
value adjustments, and (3) the foreign exchange impact on
Euro-denominated bonds for which we have entered into currency
swaps. Net Debt, on its own and in conjunction with our Adjusted
EBITDA (on a rolling 12-months basis) as part of a ratio of Net
Debt-to-Adjusted EBITDA, is a non-GAAP financial measure that is
used by management, investors, and other external users of our
financial information to evaluate our leverage. Our ratio of Net
Debt-to-Adjusted EBITDA is also used as a supplemental performance
target for purposes of our annual incentive compensation program.
We believe the most comparable measure to Net Debt is total debt.
2024 budgeted Net Debt is calculated as budgeted total debt of
$30.2 billion, less budgeted cash and cash equivalents of $0.1
billion; 2024 budgeted Net Debt does not include budgeted debt fair
value adjustments or the budgeted foreign exchange impact on our
Euro denominated debt, as these amounts are impractical to predict
and are expected to be immaterial.
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; further, we remove the
portion of these adjustments attributable to non-controlling
interests. 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.
Table 1
Kinder Morgan, Inc. and
Subsidiaries
Reconciliation of Projected
Net Income Attributable to Kinder Morgan, Inc. to Projected
DCF
(In billions,
unaudited)
2023 Forecast
2024 Budget
Net income attributable to Kinder
Morgan, Inc. (GAAP)
$
2.5
$
2.7
Total Certain Items (1)
—
—
DD&A and amortization of excess cost
of equity investments
2.3
2.4
Income tax expense (2)
0.7
0.8
Cash taxes (1)
—
—
Sustaining capital expenditures
(0.8
)
(1.0
)
Amounts from joint ventures
Unconsolidated JV DD&A
0.3
0.3
Remove consolidated JV partners'
DD&A
(0.1
)
(0.1
)
Unconsolidated JV income tax expense
(3)
0.1
0.1
Unconsolidated JV cash taxes (3)
(0.1
)
(0.1
)
Unconsolidated JV sustaining capital
expenditures
(0.2
)
(0.2
)
Remove consolidated JV partners'
sustaining capital expenditures (1)
—
—
Other items (4)
—
0.1
DCF
$
4.7
$
5.0
Table 2
Kinder Morgan, Inc. and
Subsidiaries
Reconciliation of Projected
Net Income Attributable to Kinder Morgan, Inc. to Projected
Adjusted EBITDA
(In billions,
unaudited)
2023 Forecast
2024 Budget
Net income attributable to Kinder
Morgan, Inc. (GAAP)
$
2.5
$
2.7
Total Certain Items (1)
—
—
DD&A and amortization of excess cost
of equity investments
2.3
2.4
Income tax expense (2)
0.7
0.8
Interest, net (2)
1.8
1.8
Amounts from joint ventures
Unconsolidated JV DD&A
0.3
0.3
Remove consolidated JV partners'
DD&A
(0.1
)
(0.1
)
Unconsolidated JV income tax expense
(3)
0.1
0.1
Adjusted EBITDA
$
7.6
$
8.0
Notes
(1)
Aggregate adjustments are
currently estimated to be less than $100 million.
(2)
Amounts are adjusted for Certain
Items.
(3)
Includes the tax provision on
Certain Items recognized by the investees that are taxable entities
associated with our Citrus, NGPL and Products (SE) Pipe Line equity
investments.
(4)
Includes non-cash pension
expense, non-cash compensation associated with our restricted stock
program and pension contributions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231204390364/en/
Dave Conover Media Relations newsroom@kindermorgan.com
Investor Relations (800) 348-7320 km_ir@kindermorgan.com
www.kindermorgan.com
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