Company Credit Ratings Upgraded; Substantial
Earnings Growth in 2018
Kinder Morgan, Inc. (NYSE: KMI) today announced that its board
of directors approved a cash dividend of $0.20 per share for the
fourth quarter ($0.80 annualized) payable on February 15, 2019, to
common stockholders of record as of the close of business on
January 31, 2019. KMI is reporting fourth quarter net income
available to common stockholders of $483 million, versus a net loss
available to common stockholders of $1,045 million in the fourth
quarter of 2017; and distributable cash flow (DCF) of $1,273
million, a 7 percent increase over the fourth quarter of 2017. In
2018, KMI continued to fund all growth capital through operating
cash flows with no need to access capital markets for that
purpose.
“The dividend we are declaring is a 60 percent increase from the
2017 fourth quarter dividend, and is consistent with the plan to
return value to shareholders that KMI announced during the summer
of 2017,” said Richard D. Kinder, Executive Chairman. “We are
pleased that so far two of the three ratings agencies recognized
the tremendous progress we made on our balance sheet, and we fully
expect the third agency to upgrade us later this year.”
“The fourth quarter capped a transformative year for KMI,” Chief
Executive Officer Steve Kean noted. “In 2018, we grew our business,
strengthened our balance sheet, increased our dividend, and found
new opportunities to meet the growth in demand for U.S.
infrastructure needed to serve domestic and global markets.
Contributions from our Natural Gas segment were up substantially
compared to the fourth quarter of 2017. We continued to make
progress on two projects critical to the development of resources
in the Permian Basin, the Gulf Coast Express and Permian Highway
Pipeline projects. Our three-year campaign to strengthen KMI’s
balance sheet reached an important milestone as we ended 2018 with
long-term and short-term debt less cash and cash equivalents of
approximately $33.2 billion, and an Adjusted Net Debt-to-Adjusted
EBITDA ratio of approximately 4.5 times. Consistent with that
achievement, Moody’s and Standard & Poor’s have upgraded our
credit ratings, and we are on positive outlook for an upgrade by
Fitch Ratings Inc. later in the year.”
KMI President Kim Dang said, “We had a great year in 2018.
Earnings per common share increased from $0.01 in 2017 to $0.66 in
2018, or by more than 60 times the 2017 level. Our DCF per share of
$2.12 exceeded 2017 DCF per share by $0.12 per share, or 6 percent,
and we beat our budget by $0.07 per share, or 3 percent. The
significant growth in segment earnings versus the fourth quarter of
2017 was led primarily by our Natural Gas segment. That group’s
success mirrors the record-breaking year enjoyed by the natural gas
sector as a whole. U.S. natural gas demand rose to 90 billion cubic
feet per day (Bcf/d) from 81 Bcf/d in 2017, an 11 percent increase.
Our interconnected natural gas transportation network,
strategically located products pipelines, hub-focused terminals,
and competitively advantaged CO2 business are well positioned to
capitalize on increased U.S. oil and natural gas production. We
continue to benefit from fee-based assets that generate predictable
cash flows and a network that provides our customers with unrivaled
flexibility.”
Dang continued, “Once again we had very good commercial and
operating performance. We generated fourth quarter earnings per
common share of $0.21, compared to a loss of $0.47 per common share
in the fourth quarter of 2017, and DCF of $0.56 per common share,
representing 6 percent growth over the fourth quarter of 2017. This
resulted in nearly $821 million of excess DCF above our declared
dividend.”
As noted above, KMI reported fourth quarter net income available
to common stockholders of $483 million, compared to a net loss
available to common stockholders of $1,045 million for the fourth
quarter of 2017, and DCF of $1,273 million, up 7 percent from
$1,190 million for the comparable period in 2017. The increase in
DCF compared to the fourth quarter of 2017 was due to greater
contributions from the Natural Gas business segment, lower general
and administrative expenses and lower preferred equity dividend
payments. These contributions were partially offset by reductions
in Kinder Morgan Canada earnings resulting from the Trans Mountain
sale and reduced contributions from our Terminals and CO2 segments.
Net income was impacted by a $1,432 million favorable change in
Certain Items compared to the fourth quarter of 2017, largely due
to the impact of a charge related to the 2017 Tax Cut and Jobs Act
taken in the fourth quarter of 2017. KMI’s project backlog for the
fourth quarter stood at $5.7 billion, approximately $800 million
less than the third quarter of 2018, with additions of $500 million
in new projects, primarily in the Natural Gas Pipelines segment,
offset by approximately $1.3 billion in projects placed in service
and other project capital adjustments. Excluding the CO2 segment
projects, KMI expects projects in the backlog to generate an
average capital-to-Adjusted EBITDA multiple of approximately 5.3
times.
For the full year, KMI reported net income available to common
stockholders of $1,481 million, compared to $27 million for 2017,
and DCF of $4,730 million, up 6 percent from $4,482 million for
2017. The increase in DCF was driven by greater contributions from
the Natural Gas, Products Pipelines, and CO2 business units, as
well as lower general and administrative expense and lower
preferred equity dividend payments. These contributions were
partially offset by reductions in Kinder Morgan Canada earnings
resulting from the sale of the Trans Mountain pipeline system,
higher sustaining capital expenditures and higher interest expense.
Net income available to common stockholders was impacted by a $944
million favorable change in total Certain Items compared to 2017,
largely due to the impact of the 2017 Tax Cut and Jobs Act-related
charge taken in the fourth quarter of 2017 as noted above.
2019 Outlook
For 2019, KMI’s budget contemplates declared dividends of $1.00
per common share, DCF of approximately $5.0 billion ($2.20 per
common share) and Adjusted EBITDA of approximately $7.8 billion.
KMI forecasts to invest $3.1 billion in growth projects and
contributions to joint ventures during 2019. KMI expects to use
internally generated cash flow to fully fund its 2019 dividend
payment as well as the vast majority of its 2019 discretionary
spending, without the need to access equity markets. KMI also
expects to end 2019 with a Net Debt-to-Adjusted EBITDA ratio of
approximately 4.5 times.
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 budgeted expectations assume average annual prices for
West Texas Intermediate (WTI) crude oil of $60.00 per barrel and
Henry Hub natural gas of $3.15 per million British Thermal Units
(MMBtu), consistent with forward pricing during the company’s
budget process. The vast majority of revenue KMI generates is
fee-based and therefore not directly exposed to commodity prices.
For 2019, we estimate 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 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 32,002 barrels per day (Bbl/d) at $55.81/Bbl in 2019;
17,000 Bbl/d at $56.37/Bbl in 2020; 9,400 Bbl/d at $55.06/Bbl in
2021; and 3,500 Bbl/d at $56.88/Bbl in 2022.
Overview of Business
Segments
“The Natural Gas Pipelines segment finished the year
strong. The segment’s financial performance for the fourth quarter
of 2018 was significantly higher relative to the fourth quarter of
2017,” said KMI President Kim Dang. “The transmission assets saw
higher revenue on El Paso Natural Gas (EPNG) and Natural Gas
Pipeline Company of America (NGPL) due primarily to increased
Permian-related activity, on Kinder Morgan Louisiana Pipeline
(KMLP) due to the Sabine Pass Expansion, and on Colorado Interstate
Gas Pipeline (CIG) due to continued growing production in the DJ
basin. The segment also benefited from continued increased activity
on KinderHawk and South Texas due to increased drilling and
production in the Haynesville and Eagle Ford basins. These gains
were partially offset by lower commodity pricing on Hiland and loss
of revenue due to a contract termination on Southern Gulf LNG.”
Natural gas transport volumes were up 4.5 Bcf/d or 15 percent
compared to the fourth quarter of 2017, driven by higher throughput
on EPNG due to additional Permian capacity sales; on CIG due to
growing DJ basin production; on TGP due to power demand and
projects placed in service; on the Texas Intrastates (Kinder Morgan
Texas Pipeline/Tejas) due to higher demand from shippers serving
Mexico and the Texas Gulf Coast industrial markets; and on NGPL due
to cold weather early in the quarter, increased Permian receipts
and power demand. Natural gas gathering volumes were up 21 percent
from the fourth quarter of 2017 due primarily to higher volumes on
the KinderHawk system.
Natural gas is critical to the American economy and to meeting
the world’s evolving energy needs. Objective analysts project U.S.
natural gas demand, including net exports of liquefied natural gas
(LNG) and exports to Mexico, will increase from 2018 levels by 32
percent to nearly 119 Bcf/d by 2030. Of the natural gas consumed in
the U.S., about 40 percent moves on KMI pipelines, and roughly the
same percentage holds true for U.S. natural gas exports. KMI
expects future natural gas infrastructure opportunities through
2030 will be driven by greater demand for gas-fired power
generation across the country (forecast to increase by 15 percent),
net LNG exports (forecast to increase almost five-fold), exports to
Mexico (forecast to rise by 39 percent), and continued industrial
development, particularly in the petrochemical industry.
“The Products Pipelines segment earnings were up compared
with fourth quarter 2017 performance due to contributions from the
Utopia, Double H and Cochin pipelines, partially offset by reduced
contributions from KMCC,” Dang said.
Total refined products volumes were up 1 percent for the fourth
quarter versus the same period in 2017. Ethanol volumes for the
quarter were up 5 percent while crude and condensate pipeline
volumes were up 10 percent compared to the fourth quarter of 2017.
NGL volumes were down 11 percent in the quarter versus the previous
comparable period due to unattractive pricing differentials across
the Cochin system. Lower volumes have minimal financial impact
given the terms of the underlying contracts.
“The Terminals segment was down versus the fourth quarter
of 2017. Contributions from our liquids business, which accounts
for approximately 80 percent of the segment total, were down 4
percent as the benefits of capacity increases in key hubs along the
Houston Ship Channel and Edmonton, Alberta as well as organic
volume growth at several Houston area locations were more than
off-set by tank lease costs at our Edmonton South Terminal
following the sale of Trans Mountain and continued softness in the
New York Harbor refined products storage market, particularly at
our Staten Island location,” said Dang. “The Edmonton South
Terminal tank lease costs have existed since the terminal was
developed, but prior to the Trans Mountain sale were treated as
intercompany and not allocated to the segment.”
Dang continued, “Despite higher coal volumes, contributions from
our bulk business were down 10 percent compared to the fourth
quarter of 2017 with earnings negatively impacted by certain asset
divestitures and the expiration of a major coal contract.
“CO2 segment earnings were down versus the fourth
quarter of 2017 on lower NGL volumes and lower oil prices slightly
offset by higher CO2 prices. Fourth quarter 2018 combined oil
production across all of our fields was flat compared to the same
period in 2017 on a net to KMI basis, with increases in SACROC and
Tall Cotton volumes (up 5 percent and 26 percent, respectively)
offset by declines at our other assets. Fourth quarter 2018 net NGL
sales volumes of 9.4 thousand barrels per day (MBbl/d) were down 7
percent compared to the same period in 2017, due to an operational
outage. In total for the full year of 2018, oil production on a
gross and net-to-KMI basis was up 2 and 3 percent respectively
versus 2017,” Dang said. “Our realized weighted average oil price
for the quarter was down 6 percent at $55.57 per barrel compared to
$59.32 per barrel for the fourth quarter of 2017.
Kinder Morgan Canada no longer has contributions due to
the sale of Trans Mountain on August 31, 2018. Trans Mountain
earnings are reflected herein below through that date.
Other News
Corporate
- Kinder Morgan Canada Limited (KML) made
its return of capital payment in relation to the Trans Mountain
sale proceeds on January 3, 2019. KMI is using its approximately $2
billion share of proceeds to pay down debt.
- In December 2018, KMI repurchased
approximately 1.6 million shares for approximately $25 million (at
an average price of $15.54 per share) as part of the share buy-back
program authorized by the KMI board of directors in 2017.
- In November 2018, KMI established a new
$4 billion 5-year revolving credit facility and a $500 million,
364-day revolving credit facility.
Natural Gas Pipelines
- Progress continues on the Permian
Highway Pipeline Project (PHP Project), with construction
contractors secured and surveys well underway. In November 2018,
the project partners approved an expansion of the PHP Project
capacity by approximately 0.1 Bcf/d, which is currently being
marketed. The base project capacity of 2.0 Bcf/d has been fully
subscribed. The approximately $2 billion PHP Project is designed to
transport up to 2.1 Bcf/d of natural gas through approximately 430
miles of 42-inch pipeline from the Waha, Texas area to the U.S.
Gulf Coast and Mexico markets and is expected to be in service in
late 2020, pending regulatory approvals. An affiliate of an anchor
shipper exercised its option in January 2019 to acquire a 20
percent equity interest in the project, bringing Kinder Morgan
Texas Pipeline’s (KMTP) and EagleClaw Midstream’s ownership
interest to 40 percent each. Altus Midstream (a gas gathering,
processing and transportation company formed by shipper Apache
Corporation) has an option to acquire an equity interest in the
project from the initial partners by September 2019. If Altus
exercises its option, KMI, EagleClaw and Altus will each hold a
26.67 percent ownership interest in the project. KMTP will build
and operate the pipeline.
- Construction began on schedule for the
42-inch mainline and compressor stations associated with the Gulf
Coast Express Pipeline Project (GCX Project) in October 2018.
Construction work on the remaining 40 miles of the 36-inch GCX
Midland lateral continues, with an expected in-service date of
April 2019. The GCX Project remains on schedule for a full
in-service date of October 2019. The approximately $1.75 billion
GCX Project is designed to transport approximately 2 Bcf/d of
natural gas from the Permian Basin to the Agua Dulce, Texas area,
and the project is fully subscribed under long-term, binding
agreements. KMTP is building and will operate and own a 35 percent
interest in the Project. Altus Midstream exercised its option in
December 2018 to acquire a 15 percent equity interest in the GCX
Project. DCP Midstream and an affiliate of Targa Resources each
hold a 25 percent ownership interest.
- Construction continues on the nearly $2
billion Elba Liquefaction Project. The federally approved 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. The first of
10 units is expected to be placed in service at the end of the
first quarter of 2019, with the remaining nine units to come online
throughout 2019. Elba Liquefaction Company, L.L.C. (ELC), a KMI
joint venture with EIG Global Energy Partners as a 49 percent
partner, will own the liquefaction units and other ancillary
equipment. Certain other facilities associated with the project are
100 percent owned by KMI. The newly constructed Elba Express
Modification Project is now in service, adding upstream compression
facilities on the Elba Express pipeline to provide feed gas for
liquefaction.
- TGP’s Broad Run Expansion Project,
which adds 200,000 Dth/d of capacity, was placed in full service at
the end of October 2018. This project and the Broad Run Flexibility
Project provide Antero Resources a total of 790,000 Dth/d of
15-year firm capacity from a receipt point on TGP’s existing Broad
Run Lateral in West Virginia to delivery points in Mississippi and
Louisiana. Capital expenditures for the combined projects total
approximately $805 million.
- TGP placed its approximately $106
million Lone Star project in service in December 2018. TGP
previously signed a binding, 20-year agreement with Corpus Christi
Liquefaction, LLC. This expansion project provides 300,000 Dth/d of
incremental firm transportation capacity from an existing receipt
point on TGP's system in Louisiana to a new point of
interconnection with Cheniere Corpus Christi Pipeline, L.P. on
TGP’s 100 Line in San Patricio County, Texas.
- The approximately $245 million SNG
Fairburn Expansion Project in Georgia (KMI share: $122.5 million)
was placed in full service in December 2018. The project provides
approximately 350,000 Dth/d of incremental long-term firm natural
gas transportation capacity into the Southeast market. SNG is a
joint venture equally owned by subsidiaries of KMI and Southern
Company.
- The Sabine Pass Expansion project on
the Kinder Morgan Louisiana Pipeline (KMLP) system was placed in
service in December 2018. This approximately $133 million expansion
project provides 600,000 Dth/d of incremental firm transportation
capacity from various receipt points to Cheniere’s Sabine Pass
Liquefaction Terminal in Cameron Parish, Louisiana. This project is
supported by a 20-year agreement with Sabine Pass Liquefaction,
LLC.
- In November 2018, Gulf LNG Liquefaction
Company LLC, Gulf LNG Energy LLC and Gulf LNG Pipeline, LLC
(GLNG) received a favorable Draft Environmental Impact Statement
(DEIS) from the FERC for its potential liquefaction project.
According to FERC’s Notice of Schedule for Environmental Review
that was issued in August 2018, the final Environmental Impact
Statement (EIS) should be complete in April 2019, and the final
decision for issuance of the FERC certificate is expected in July
2019.
Products Pipelines
- In November 2018, KMI announced it was
moving forward with the Roanoke Expansion project after a
successful open season that secured long-term committed volumes of
20,000 barrels per day (bpd). Following this announcement, a
Petition for Declaratory Order (PDO) was filed with the FERC in
December 2018 regarding the regulatory framework and commercial
terms of the project. This project will provide for approximately
21,000 bpd of incremental refined petroleum products capacity on
the Plantation pipeline system from the Baton Rouge, Louisiana and
Collins, Mississippi origin points to the Roanoke, Virginia area.
The expansion will primarily consist of additional pump capacity
and operational storage on the Plantation system. Pending the
receipt of regulatory approvals, the project will be in service by
April 1, 2020.
Terminals
- With the final tanks placed in service
early in the fourth quarter of 2018, construction of all major
facilities at the Base Line Terminal in Edmonton, Alberta, Canada,
is complete. The 12-tank, 4.8 million barrel facility is fully
contracted with long-term, firm take-or-pay agreements with
creditworthy customers. The 50-50 joint venture crude oil merchant
storage terminal developed by KML and Keyera Corp. was completed on
time and under budget, with Kinder Morgan investing approximately
C$357 million.
- Permitting efforts continue on the
distillate storage expansion project at KML’s Vancouver Wharves
terminal in North Vancouver, British Columbia. The C$43 million
capital project, which calls for the construction of two new
distillate tanks with combined storage capacity of 200,000 barrels
and enhancements to the railcar unloading capabilities, is
supported by a 20-year initial term, take-or-pay contract with an
affiliate of a large, international integrated energy company. The
project is expected to be placed in service in the first quarter of
2021.
CO2
- The SACROC field continues to grow, as
evidenced by its strong fourth quarter production, which was up 5
percent versus the same prior year period. This continued
production is due to KMI’s on-going success in exploiting the
transition zone, which holds an estimated incremental 700 million
barrels of original oil in place.
- KMI CO2 has acquired the Reinecke oil
field, located in Borden County, Texas for approximately $20
million. The acquisition is a strategic EOR addition to the
company’s SACROC complex, adding 200 barrels of oil per day and 500
barrels of NGLs per day to current production. SACROC currently
processes approximately 25MMCFD of Reinecke produced gas.
- Oil production in the fourth quarter at
KMI’s Tall Cotton facility increased by 26 percent relative to the
same period in 2017 after completing the second phase of its field
project. 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.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy
infrastructure companies in North America. We own an interest in or
operate approximately 84,000 miles of pipelines and
157 terminals. Our pipelines transport natural gas, refined
petroleum products, crude oil, condensate, CO2 and other products,
and our terminals transload and store liquid commodities including
petroleum products, ethanol and chemicals, and bulk products,
including petroleum coke, metals and ores. For more information
please visit www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. Eastern Time on
Wednesday, January 16, at www.kindermorgan.com for a
LIVE webcast conference call on the company’s fourth quarter
earnings.
Non-GAAP Financial
Measures
The non-generally accepted accounting principles (non-GAAP)
financial measures of 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, net income attributable to
noncontrolling interests further adjusted for KML noncontrolling
interests, 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 the company’s ability to generate
earnings. We believe the GAAP measure most directly comparable to
Adjusted Earnings is net income available to common stockholders.
Adjusted Earnings per share uses Adjusted Earnings and applies the
same two-class method used in arriving at Basic Earnings Per Common
Share.
Net Debt and Adjusted Net Debt, as used in this news release,
are non-GAAP financial measures that management believes are useful
to investors and other users of our financial information in
evaluating our leverage. Net Debt is calculated by subtracting from
debt (i) cash and cash equivalents, (ii) the preferred interest in
the general partner of Kinder Morgan Energy Partners L.P., (iii)
debt fair value adjustments, and (iv) the foreign exchange impact
on Euro-denominated bonds for which we have entered into currency
swaps. Adjusted Net Debt is Net Debt increased by (i) 50% of the
outstanding KML preferred equity and (ii) the amount of cash
distributed to KML restricted voting shareholders as a return of
capital on January 3, 2018, net of the gain realized on settlement
of net investment hedges of our foreign currency risk with respect
to our share of the KML return of capital on January 3, 2018. We
believe the most comparable measure to Net Debt and Adjusted Net
Debt is debt net of cash and cash equivalents as reconciled in the
notes to the accompanying Preliminary Consolidated Balance Sheets
page.
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 EndedDecember
31,
Year EndedDecember 31,
2018 2017 2018 2017
Revenues $ 3,781 $ 3,632 $ 14,144 $
13,705 Costs, expenses and other Costs of sales 1,199
1,207 4,421 4,345 Operations and maintenance 640 774 2,522 2,472
Depreciation, depletion and amortization 587 564 2,297 2,261
General and administrative 110 179 601 688 Taxes, other than income
taxes 86 101 345 398 Loss on impairments and divestitures, net 102
— 167 13 Other income, net (1 ) (1 ) (3 ) (1 ) 2,723 2,824
10,350 10,176 Operating income 1,058
808 3,794 3,529 Other income (expense) Earnings from equity
investments 179 101 887 578 Loss on impairment of equity investment
— (150 ) (270 ) (150 ) Amortization of excess cost of equity
investments (18 ) (16 ) (95 ) (61 ) Interest, net (461 ) (445 )
(1,917 ) (1,832 ) Other, net 17 26 107 97
Income before income taxes 775 324 2,506 2,161
Income tax expense (273 ) (1,316 ) (587 ) (1,938 ) Net
income (loss) 502 (992 ) 1,919 223 Net income attributable
to noncontrolling interests (8 ) (14 ) (310 ) (40 ) Net
income (loss) attributable to Kinder Morgan, Inc. 494 (1,006 )
1,609 183 Preferred stock dividends (11 ) (39 ) (128 ) (156
)
Net income (loss) available to common stockholders
$ 483 $ (1,045 ) $
1,481 $ 27 Class P
Shares Basic and diluted earnings (losses) per common share $
0.21 $ (0.47 ) $ 0.66 $ 0.01 Basic and
diluted weighted average common shares outstanding 2,248
2,229 2,216 2,230
Declared dividend
per common share $ 0.20 $
0.125 $ 0.80 $
0.50 Adjusted earnings per common share
(1) $ 0.25 $ 0.21
$ 0.89 $ 0.66
Segment EBDA
%change
%change
Natural Gas Pipelines $ 1,155 $ 641 80 % $ 3,580 $ 3,487 3 %
Products Pipelines 316 318 (1 )% 1,173 1,231 (5 )% Terminals 301
299 1 % 1,171 1,224 (4 )% CO2 198 211 (6 )% 759 847 (10 )% Kinder
Morgan Canada (26 ) 50 (152 )% 720 186 287 %
Total Segment EBDA $ 1,944 $
1,519 28 %
$ 7,403 $
6,975 6 %
Note
(1) Adjusted earnings per common share uses adjusted
earnings and applies the same two-class method used in arriving at
diluted earnings (losses) per common share. See the following page,
Preliminary Earnings Contribution by Business Segment, for a
reconciliation of net income (loss) 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 December
31,
Year Ended December 31,
2018 2017
% change
2018 2017
% change
Segment EBDA before certain items (1) Natural Gas Pipelines $ 1,110
$ 1,027 8 % $ 4,202 $ 3,879 8 % Products Pipelines 317 314 1 %
1,234 1,193 3 % Terminals 302 317 (5 )% 1,205 1,214 (1 )% CO2 216
228 (5 )% 907 887 2 % Kinder Morgan Canada — 50 (100
)% 124 186 (33 )% Subtotal 1,945 1,936 — % 7,672
7,359 4 % DD&A and amortization of excess investments
(605 ) (580 ) (2,392 ) (2,322 ) General and administrative and
corporate charges (1) (2) (97 ) (163 ) (564 ) (645 ) Interest, net
(1) (469 ) (463 ) (1,891 ) (1,871 ) Subtotal 774 730
2,825 2,521 Book taxes (1) (182 ) (207 ) (645
) (853 ) Certain items Fair value amortization 7 11 34 53 Legal and
environmental reserves (10 ) (6 ) (63 ) 37 Change in fair market
value of derivative contracts (3) 110 (13 ) (80 ) (40 ) Losses on
impairments and divestitures, net (109 ) (157 ) (317 ) (170 )
Hurricane (damage) recoveries, net (1 ) (18 ) 24 (27 ) Refund and
reserve adjustment of taxes, other than income taxes — — 51 — Other
4 (4 ) (4 ) 6 Noncontrolling interests' portion of certain items 8
1 (240 ) — Subtotal certain items before tax 9
(186 ) (595 ) (141 ) Book tax certain items (91 ) 53 58 77 Impact
of 2017 Tax Cuts and Jobs Act — (1,381 ) 36 (1,381 )
Total certain items (82 ) (1,514 ) (501 ) (1,445 ) Net
income attributable to noncontrolling interests before certain
items (1) (16 ) (15 ) (70 ) (40 ) Preferred stock dividends
(11 ) (39 ) (128 ) (156 )
Net income (loss) available to common
stockholders $ 483 $ (1,045
) $ 1,481 $ 27
Net income (loss) available to common stockholders $ 483 $
(1,045 ) $ 1,481 $ 27 Total certain items 82 1,514
501 1,445 Adjusted earnings 565 469 1,982 1,472
DD&A and amortization of excess investments (4) 696 666 2,752
2,684 Total book taxes (5) 198 232 710 957 Cash taxes (6) (17 ) (18
) (77 ) (72 ) Other items (7) 12 13 15 29 Sustaining capital
expenditures (8) (181 ) (172 ) (652 ) (588 )
DCF $
1,273 $ 1,190 $
4,730 $ 4,482 Weighted
average common shares outstanding for dividends (9) 2,261 2,239
2,228 2,240 DCF per common share $ 0.56 $ 0.53 $ 2.12 $ 2.00
Declared dividend per common share $ 0.20 $ 0.125 $ 0.80 $ 0.50
Adjusted EBITDA (10) $ 1,962 $ 1,896 3 % $ 7,568 $ 7,198 5 %
Notes ($
million)
(1) Excludes certain items: 4Q 2018 - Natural Gas
Pipelines $45, Products Pipelines $(1), Terminals $(1), CO2 $(18),
Kinder Morgan Canada $(26), general and administrative and
corporate charges $(6), interest expense $8, book tax $(91),
noncontrolling interests $8. 4Q 2017 - Natural Gas Pipelines
$(386), Products Pipelines $4, Terminals $(18), CO2 $(17), general
and administrative and corporate charges $(7), interest expense
$18, book tax $(1,109), noncontrolling interests $1. YTD 2018 -
Natural Gas Pipelines $(622), Products Pipelines $(61), Terminals
$(34), CO2 $(148), Kinder Morgan Canada $596, general and
administrative and corporate charges $(24), interest expense $(26),
book tax $58, noncontrolling interests $(240). YTD 2017 - Natural
Gas Pipelines $(392), Products Pipelines $38, Terminals $10, CO2
$(40), general and administrative and corporate charges $(15),
interest expense $39, book tax $(1,085).
(2) Includes
corporate (benefit) charges: 4Q 2018 - $(7) YTD 2018 - $(13) YTD
2017 - $7 General and administrative expense is also net of
management fee revenues from an equity investee: 4Q 2017 - $(9) YTD
2017 - $(35)
(3) Gains or losses are reflected in our DCF
when realized.
(4) 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: 4Q 2018 - $91 4Q 2017 - $86 YTD 2018 - $360 YTD 2017 -
$362
(5) 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: 4Q 2018 - $16
4Q 2017 - $25 YTD 2018 - $65 YTD 2017 - $104
(6) Includes
KMI's share of taxable equity investees' cash taxes: 4Q 2018 -
$(18) 4Q 2017 - $(15) YTD 2018 - $(68) YTD 2017 - $(69)
(7)
Includes pension contributions and non-cash compensation associated
with our restricted stock program.
(8) Includes KMI's share
of certain equity investees' sustaining capital expenditures (the
same equity investees for which DD&A is added back): 4Q 2018 -
$(28) 4Q 2017 - $(33) YTD 2018 - $(105) YTD 2017 - $(107)
(9) Includes restricted stock awards that participate in
common share dividends.
(10) Net (loss) income is reconciled
to Adjusted EBITDA as follows, with any difference due to rounding:
Three Months Ended December
31,
Year Ended December 31, 2018
2017 2018 2017 Net income (loss)
502 (992 ) 1,919 223 Total certain items 82 1,514 501 1,445 Net
loss (income) attributable to noncontrolling interests (11) 5 —
(252 ) (12 ) DD&A and amortization of excess investments (4)
(12) 702 674 2,782 2,704 Book taxes (5) (12) 202 237 727 967
Interest, net (1) 469 463 1,891 1,871
Adjusted EBITDA $ 1,962 $ 1,896 $ 7,568 $
7,198
(11) Excludes KML noncontrolling
interests before certain items: 4Q 2018 - $13 4Q 2017 - $13 YTD
2018 - $58 YTD 2017 - $27
(12) Includes the noncontrolling
interests' portion of KML before certain items: 4Q 2018 - DD&A
$5; Book taxes $4 4Q 2017 - DD&A $8; Book taxes $5 YTD 2018 -
DD&A $30; Book taxes $17 YTD 2017 - DD&A $20; Book taxes
$10
Volume Highlights
(historical pro forma for acquired and
divested assets)
Three Months Ended December
31,
Year Ended December 31,
2018 2017 2018
2017 Natural Gas Pipelines Transport Volumes (BBtu/d)
(1) 34,551 30,033 32,821 29,108 Sales Volumes (BBtu/d) (2) 2,339
2,375 2,472 2,341 Gas Gathering Volumes (BBtu/d) (3) 3,256 2,698
2,972 2,647 Crude/Condensate Gathering Volumes (MBbl/d) (4) 322 286
307 273 Products Pipelines Pacific, Calnev, and CFPL
(MBbl/d) Gasoline (5) 807 807 821 811 Diesel 314 308 310 298 Jet
Fuel 272 263 271 264 Sub-Total Refined
Product Volumes - excl. Plantation 1,393 1,378 1,402 1,373
Plantation (MBbl/d) (6) Gasoline 217 221 217 227 Diesel 63 56 62 53
Jet Fuel 31 33 31 33 Sub-Total Refined
Product Volumes - Plantation 311 310 310 313 Total (MBbl/d)
Gasoline (5) 1,024 1,028 1,038 1,038 Diesel 377 364 372 351 Jet
Fuel 303 296 302 297 Total Refined
Product Volumes 1,704 1,688 1,712 1,686 NGLs (MBbl/d) (7) 101 113
114 112 Crude and Condensate (MBbl/d) (8) 373 339 345
327 Total Delivery Volumes (MBbl/d) 2,178 2,140 2,171
2,125 Ethanol (MBbl/d) (9) 124 119 126 117 Terminals Liquids
Leasable Capacity (MMBbl) 90.1 87.6 90.1 87.6 Liquids Utilization %
93.5 % 93.6 % 93.5 % 93.6 % Bulk Transload Tonnage (MMtons) (10)
16.5 15.0 64.2 59.5 Ethanol (MMBbl) 14.5 16.8 61.7 68.1 CO2
Southwest Colorado Production - Gross (Bcf/d) (11) 1.24 1.28 1.21
1.29 Southwest Colorado Production - Net (Bcf/d) (11) 0.58 0.59
0.56 0.61 Sacroc Oil Production - Gross (MBbl/d) (12) 29.74 28.35
29.28 27.88 Sacroc Oil Production - Net (MBbl/d) (13) 24.77 23.61
24.39 23.22 Yates Oil Production - Gross (MBbl/d) (12) 16.38 17.00
16.74 17.34 Yates Oil Production - Net (MBbl/d) (13) 7.09 7.44 7.43
7.67 Katz, Goldsmith, and Tall Cotton Oil Production - Gross
(MBbl/d) (12) 7.95 8.76 8.16 8.10 Katz, Goldsmith, and Tall Cotton
Oil Production - Net (MBbl/d) (13) 6.78 7.43 6.95 6.86 NGL Sales
Volumes (MBbl/d) (14) 9.38 10.12 10.01 9.94 Realized Weighted
Average Oil Price per Bbl (15) $ 55.57 $ 59.32 $ 57.83 $ 58.40
Realized Weighted Average NGL Price per Bbl $ 28.68 $ 28.81 $ 32.21
$ 25.15 Trans Mountain (MMBbl/d - mainline
throughput) (16) — 303 218 308
Notes
(1) Includes Texas Intrastates, Gulf Coast Express,
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, 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) Gasoline volumes
include ethanol pipeline volumes.
(6) Plantation reported at
KMI share.
(7) Includes Cochin, Utopia (KMI share), and
Cypress (KMI share).
(8) Includes KMCC, Double Eagle (KMI
share), and Double H.
(9) Total ethanol handled including
pipeline volumes included in gasoline volumes above.
(10)
Includes KMI's share of Joint Venture tonnage.
(11) Includes
McElmo Dome and Doe Canyon sales volumes.
(12) Represents
100% production from the field.
(13) Represents KMI's net
share of the production from the field.
(14) Net to KMI.
(15) Includes all KMI crude oil properties.
(16)
Throughput reported until date of sale, August 31, 2018.
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Balance
Sheets
(Unaudited)
(In millions)
December 31, 2018
2017 ASSETS Cash and cash equivalents $ 3,280
$ 264 Other current assets 2,442 2,451 Property, plant and
equipment, net 37,897 40,155 Investments 7,481 7,298 Goodwill
21,965 22,162 Deferred charges and other assets 5,801 6,725
TOTAL ASSETS $ 78,866 $
79,055 LIABILITIES, REDEEMABLE
NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
Liabilities Short-term debt $ 3,388 $ 2,828 Other current
liabilities 4,169 3,353 Long-term debt 33,105 33,988 Preferred
interest in general partner of KMP 100 100 Debt fair value
adjustments 731 927 Other 2,176 2,735 Total
liabilities 43,669 43,931
Redeemable
Noncontrolling Interest 666 —
Shareholders' Equity Other shareholders' equity 34,008
34,177 Accumulated other comprehensive loss (330 ) (541 ) KMI
equity 33,678 33,636 Noncontrolling interests 853 1,488
Total shareholders' equity 34,531 35,124
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND
SHAREHOLDERS' EQUITY $ 78,866 $
79,055 Net Debt (1) $
33,137 $ 36,409 Adjusted Net Debt (2)
34,151 36,624
Adjusted EBITDA Twelve Months
Ended December 31,
Reconciliation of Net Income to Adjusted EBITDA 2018
2017 Net income $ 1,919 $ 223 Total certain items 501 1,445
Net income attributable to noncontrolling interests (3) (252 ) (12
) DD&A and amortization of excess investments (4) 2,782 2,704
Income tax expense before certain items (5) 727 967 Interest, net
before certain items 1,891 1,871
Adjusted
EBITDA $ 7,568 $ 7,198
Net Debt to Adjusted EBITDA 4.4
5.1 Adjusted Net Debt to Adjusted EBITDA 4.5
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 $76 million
and $143 million as of December 31, 2018 and 2017, respectively, as
we have entered into swaps to convert that debt to U.S.$. (2)
Amounts include 50% of KML preferred shares, which is included in
noncontrolling interests, of $215 million as of both December 31,
2018 and 2017. Also, the cash component as of December 31, 2018 has
been (i) reduced by $890 million, representing the portion of cash
KML distributed to KML restricted voting shareholders on January 3,
2019 as a return of capital; and (ii) increased by $91 million,
representing the unrecognized gain as of December 31, 2018 on net
investment hedges which hedge our exposure to foreign currency risk
associated with a substantial portion of our share of the proceeds
from the sale of TMPL, TMEP and related assets. (3) 2018 and 2017
amounts exclude KML noncontrolling interests before certain items
of $58 million and $27 million, respectively. (4) 2018 and 2017
amounts include KMI's share of certain equity investees' DD&A
of $390 million and $382 million, respectively. (5) 2018 and 2017
amounts include KMI's share of taxable equity investees' book taxes
before certain items of $82 million and $114 million, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190116005692/en/
Dave ConoverMedia Relations(713)
420-6397newsroom@kindermorgan.com
Investor Relations(800)
348-7320km_ir@kindermorgan.comwww.kindermorgan.com
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