$1.13 dividend per share; $1.12 net income
attributable to KMI per share; and $7.7 billion Adjusted
EBITDA
Kinder Morgan, Inc. (NYSE: KMI) today announced its preliminary
2023 financial projections. “We expect 2023 to be another very good
year for Kinder Morgan, with strong market fundamentals, continued
robust growth in demand for existing and expanded natural gas
transportation, storage, and gathering and processing; and
continued demand for refined products midstream services and
investments in our Energy Transition Ventures business,” said Steve
Kean, KMI Chief Executive Officer. “Those results will be offset by
the higher interest rate environment we expect in 2023. We
anticipate generating net income attributable to KMI per share of
$1.12, flat to our year-end 2022 forecast of $1.12 per share, with
Adjusted EBITDA up 3% from 2022 at $7.7 billion, compared to the
2022 forecast of $7.5 billion. We anticipate total segment EBDA of
$8.2 billion, up 5% compared to the 2022 forecast. We also expect
to end 2023 with a Net Debt-to-Adjusted EBITDA ratio of 4.0 times,
well below our long-term target of 4.5 times.”
“We expect distributable cash flow (DCF) per share of $2.13,
down from our 2022 forecast of $2.17 DCF per share. We project
interest expense to be significantly higher than our 2022 forecast,
representing a DCF impact of approximately $0.15 per share. Absent
that impact, expected DCF per share would be up 5% year over year,”
said Kimberly Dang, KMI President. “Over the long-term, our
corporate strategy of maintaining a portion (~25%) of our debt at a
floating rate has been sound, saving the company approximately $1.2
billion over the last 10 years, far exceeding the expected 2023
impact.”
Below is a summary of KMI’s expectations for 2023:
- Generate $1.12 of net income attributable to KMI per share,
flat to our current 2022 forecast of $1.12.
- Generate $2.13 DCF per share, down 1% from the current forecast
for 2022 due to the impact of the projected increased interest
expense discussed above.
- Generate $7.7 billion of Adjusted EBITDA, up 3% from the 2022
forecast; and total segment EBDA of $8.2 billion, up 5% from the
2022 forecast.
- Invest $2.1 billion in expansion projects and contributions to
joint ventures, or discretionary capital expenditures (of which
roughly 80% is in lower carbon projects).
- Return additional value to shareholders in 2023 through an
anticipated $1.13 per share dividend (annualized) and opportunistic
share repurchases.
- End 2023 with a Net Debt-to-Adjusted EBITDA ratio of 4.0 times,
well below our long-term target of approximately 4.5 times.
- The expected $2.13 of DCF per share and the 4.0 times leverage
metric do not reflect the impact of possible opportunistic share
repurchases, which KMI will have substantial capacity to transact
on.
Please see “Non-GAAP Financial Measures” below for definitions
of DCF, Adjusted EBITDA and Net Debt, and the accompanying tables
for reconciliations of 2023 budgeted net income attributable to KMI
to budgeted DCF and budgeted Adjusted EBITDA.
KMI’s expectations assume average annual prices for West Texas
Intermediate (WTI) crude oil and Henry Hub natural gas of $85 per
barrel and $5.50 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 2023, the company estimates that every $1 per barrel change in
the average WTI crude oil price impacts DCF by approximately $9.1
million and each $0.10 per MMBtu change in the price of natural gas
impacts DCF by approximately $1.3 million.
The KMI board of directors has preliminarily reviewed the 2023
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 25, 2023, in
Houston, Texas. The 2023 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 2023
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 the people,
communities and businesses we serve. We own an interest in or
operate approximately 83,000 miles of pipelines, 141 terminals, 700
billion cubic feet of working natural gas storage capacity and have
renewable natural gas generation capacity of approximately 2.2 Bcf
per year of gross production with an additional 5.2 Bcf in
development. Our pipelines transport natural gas, refined petroleum
products, renewable fuels, crude oil, condensate, CO2 and other
products, and our terminals store and handle various commodities
including gasoline, diesel fuel, renewable fuel feedstocks,
chemicals, ethanol, metals and petroleum coke. Learn more about our
renewables initiatives on the low carbon solutions 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
2022 and 2023, including expected net income attributable to Kinder
Morgan, Inc., DCF (in each case in the aggregate and per share),
total segment EBDA, Adjusted EBITDA, Net Debt-to-Adjusted EBITDA
ratios, anticipated dividends and discretionary capital
expenditures, and KMI’s financing strategy, including use of
floating-rate debt. 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, 2021 (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
The non-generally accepted accounting principles (non-GAAP)
financial measures of distributable cash flow (DCF), both in the
aggregate and per share; Adjusted EBITDA; and Net Debt are
presented herein.
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 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 attributable to
Kinder Morgan, Inc., 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).
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
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 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 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 is used by management and
external users, in conjunction with our Net Debt (as described
further below), to evaluate certain leverage metrics. Therefore, we
believe Adjusted EBITDA is useful to investors. We believe the GAAP
measure most directly comparable to Adjusted EBITDA is net income
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 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.
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. 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)
2022 Forecast
2023 Projected
Guidance
Net income attributable to Kinder
Morgan, Inc. (GAAP)
$
2.5
$
2.5
Total Certain Items (1)
0.1
—
DD&A and amortization of excess cost
of equity investments for DCF (2)
2.5
2.5
Income tax expense for DCF (2)(3)
0.8
0.8
Cash taxes (2)
(0.1
)
(0.1
)
Sustaining capital expenditures (2)
(0.9
)
(1.0
)
Other items (4)
—
0.1
DCF
$
4.9
$
4.8
Table 2
Kinder Morgan, Inc. and
Subsidiaries
Reconciliation of Projected
Net Income Attributable to Kinder Morgan, Inc. to Projected
Adjusted
(In billions,
unaudited)
2022 Forecast
2023 Projected
Guidance
Net income attributable to Kinder
Morgan, Inc. (GAAP)
$
2.5
$
2.5
Total Certain Items (1)
0.1
—
DD&A and amortization of excess cost
of equity investments
2.3
2.3
Income tax expense (3)
0.7
0.7
JV DD&A and income tax expense (2)
0.4
0.3
Interest, net (3)
1.5
1.9
Adjusted EBITDA
$
7.5
$
7.7
Notes
(1)
Aggregate adjustments for Total Certain
Items are currently estimated to be less than $100 million.
(2)
Includes or represents DD&A, income
tax expense, cash taxes and/or sustaining capital expenditures (as
applicable for each item) from JVs.
(3)
Amounts are adjusted for Certain
Items.
(4)
Includes pension contributions, non-cash
pension expense and non-cash compensation associated with our
restricted stock program.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221207005044/en/
Dave Conover Media Relations newsroom@kindermorgan.com
Investor Relations (800) 348-7320 km_ir@kindermorgan.com
www.kindermorgan.com
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