Kinder Morgan Board Authorizes $1 Billion
Increase in Share Repurchase Program; Management Announces
Succession Plans
Kinder Morgan, Inc.’s (NYSE: KMI) board of directors today
approved a cash dividend of $0.2775 per share for the fourth
quarter ($1.11 annualized), payable on February 15, 2023, to
stockholders of record as of the close of business on January 31,
2023. This dividend is a 3% increase over the fourth quarter of
2021.
The company is reporting fourth quarter net income attributable
to KMI of $670 million, compared to net income attributable to KMI
of $637 million in the fourth quarter of 2021; and distributable
cash flow (DCF) of $1,217 million, compared to $1,093 million in
the fourth quarter of 2021. Adjusted Earnings were $708 million for
the quarter, versus $609 million in the fourth quarter of 2021.
“Our company closed out the year with another strong quarter,”
said Executive Chairman Richard D. Kinder. “We generated robust
earnings and strong coverage of this quarter’s dividend. Company
shareholders continue to benefit from our capital-efficient
business model that delivers on our time-tested goals: maintain a
strong investment-grade balance sheet, internally fund expansion
opportunities, pay an attractive and growing dividend, and further
reward our shareholders by repurchasing our shares on an
opportunistic basis.”
“Our people, assets and systems performed very well this
quarter, especially given the volatile weather and pricing we
experienced late in the quarter,” said Chief Executive Officer
Steve Kean. “Our Natural Gas Pipelines segment performed well above
plan for the quarter, as did our CO2 segment, which benefited from
continued high commodity prices.
“Heightened concerns about energy security this year cast a
spotlight on the U.S. liquefied natural gas (LNG) export sector.
Our own and independent analysts project that demand from LNG
facilities is expected to double in the coming years, and we are
moving forward with projects to provide additional transport
capacity for that growing market,” continued Kean. “With a large
portion of our existing network in Texas and Louisiana — where
nearly all of that LNG demand growth is expected to occur — we
expect to largely serve that growth with highly capital-efficient
expansions on our existing network.
“Domestically, our customers are increasingly benefiting from
the high deliverability inherent in our extensive interconnected
natural gas network, especially the industry-leading storage
services we offer from our 700 billion cubic feet (Bcf) of working
natural gas storage capacity,” continued Kean. “The need for those
flexible deliverability services will continue to grow in the face
of extreme weather events and as intermittent renewable energy
resources continue to expand their share in the power sector.
“KMI’s future is bright. The assets we operate and the services
we provide will be needed for a long time to come. And many of our
employees are now actively helping to shape a lower- carbon energy
future, with roughly 80% of our project backlog in lower-carbon
energy services, including natural gas as a substitute for higher
emitting fuels, producer certified natural gas, renewable natural
gas, renewable diesel, and feedstocks associated with renewable
diesel and sustainable aviation fuel,” Kean concluded.
“Our financial performance during the quarter was strong, as we
generated earnings per share of $0.30 and DCF per share of $0.54,”
said KMI President Kim Dang. “Earnings per share for the quarter
were up 7% and DCF per share was up 13% as compared to the fourth
quarter of 2021. We generated $590 million of excess DCF above our
declared dividend during the quarter.
“During the quarter, we combined strong performance within our
base business with exciting new developments supporting the
transition to lower carbon energy sources,” continued Dang. “Our
Terminals business segment is growing its industry-leading
renewable diesel and sustainable aviation fuel feedstock storage
and logistics offering in support of a customer’s expansion of its
nearby renewable diesel plant. We continue to make good progress on
the three Kinetrex Energy renewable natural gas facilities, all of
which are on track to be placed in service in 2023. And we expect
to move forward with our first carbon capture and sequestration
project with our joint venture Red Cedar Gathering Company. As
Steve noted, our future is bright.”
For the full year of 2022, the company reported net income
attributable to KMI of $2,548 million, compared to $1,784 million
for the full year of 2021 and DCF of $4,970 million, down 9% from
$5,460 million for the comparable period in 2021. Net income is up
in 2022 in part due to a non-cash impairment charge taken in 2021.
The DCF decrease compared to the prior period is due primarily to
nonrecurring earnings during the February 2021 winter storm.
Without the impact of the storm, DCF for the full year of 2022 is
up 14% versus the prior year. KMI ended 2022 with a Net
Debt-to-Adjusted EBITDA ratio of 4.1 times, well below our target
of 4.5 times.
2023 Outlook
For 2023, KMI expects to generate net income attributable to KMI
of $2.5 billion ($1.12 per share) and declare dividends of $1.13
per share, a 2% increase from the dividends declared for 2022. The
company also budgeted to generate 2023 DCF of $4.8 billion ($2.13
per share) and Adjusted EBITDA of $7.7 billion and 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.
This press release includes Adjusted Earnings and distributable
cash flow (DCF), in each case in the aggregate and per share,
Adjusted Segment EBDA, Adjusted EBITDA, Net Debt and free cash flow
(FCF), 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” and the tables accompanying our
financial statements.
Overview of Business
Segments
“The Natural Gas Pipelines segment’s financial
performance was up in the fourth quarter of 2022 relative to the
fourth quarter of 2021, primarily on higher contributions from our
Texas Intrastate system, Midcontinent Express Pipeline and El Paso
Natural Gas (EPNG); increased volumes on our KinderHawk gathering
system; and favorable pricing on the Altamont gathering system,
partially offset by lower contributions from our South Texas
gathering assets,” said Dang.
Natural gas transport volumes were up 4% compared to the fourth
quarter of 2021, with increases on EPNG due to colder weather and
coal-fired power generation retirements; on Kinder Morgan Louisiana
Pipeline due to increased deliveries to LNG customers; and on
Colorado Interstate Gas Pipeline and Natural Gas Pipeline Company
of America due to colder weather. Natural gas gathering volumes
were up 6% from the fourth quarter of 2021 with higher volumes
primarily on KinderHawk (which serves the Haynesville shale).
“Contributions from the Products Pipelines segment were
down compared to the fourth quarter of 2021 primarily due to higher
operating expenses, as well as lower contributions from our crude
and condensate business,” Dang said. “Total refined products
volumes were down 1%, while crude and condensate pipeline volumes
were down 6% compared to the fourth quarter of 2021. Gasoline
volumes were below the comparable period last year by 2% and diesel
volumes were down 4%. Jet fuel volumes continued their strong
rebound, up 10% versus the fourth quarter of 2021. These impacts
were partially offset by higher rates on both the refined products
and crude and condensate businesses as well as increased volumes
through our petroleum condensate processing facility in the Houston
Ship Channel.”
“Terminals segment earnings were flat compared to the
fourth quarter of 2021. Our bulk business benefited from continued
strength in both handling rates and volumes for export coal and
petroleum coke as well as the non-recurring impact from 2021’s
Hurricane Ida. These were partially offset by our steel business.
Our liquids business was down primarily due to increased property
taxes, unexpected costs related to the December deep freeze weather
event and slightly lower Houston Ship Channel and New York Harbor
refined products tank renewal rates, partially offset by
contributions from growth projects placed in service and other rate
escalations,” continued Dang. “In our Jones Act tanker business,
the effects of improving fundamentals were evident in the quarter.
Earnings contributions were meaningfully higher compared to the
fourth quarter of 2021, as the fleet benefited from both higher
utilization and higher average charter rates versus the prior year
period.”
“CO2 segment earnings were well up compared to the fourth
quarter of 2021 primarily due to higher realized crude, natural gas
liquids (NGL) and CO2 prices, as well as higher CO2 volumes. Our
realized weighted average crude oil price for the quarter was up
20% at $65.06 per barrel, while our weighted average NGL price for
the quarter was up 17% from the fourth quarter of 2021 at $35.26
per barrel, and CO2 prices were up $0.16 or 13%,” said Dang.
“Fourth quarter 2022 combined net oil production across our fields
was flat to the same period in 2021, but well above our 2022 plan.
NGL sales volumes net to KMI were down 4% versus the fourth quarter
of 2021, while CO2 sales volumes were up 12% on a net-to-KMI basis
compared to the fourth quarter of 2021.”
Organizational Changes
- Kim Dang to become Chief Executive Officer of KMI effective
August 1, 2023
- Tom Martin to become President of KMI
- Sital Mody to become President of Natural Gas Group
- Steve Kean to remain on KMI Board of Directors
After over 20 years with Kinder Morgan, the last 8 years as CEO,
Steve Kean has announced his intention to transition out of his
role as CEO effective August 1, 2023. He will remain on the KMI
Board of Directors. Kim Dang, currently President of Kinder Morgan,
will succeed Steve as CEO, and Tom Martin, the current President of
KMI’s Natural Gas Group – the largest of KMI’s four business
segments – will become KMI President, also effective August 1,
2023. As previously announced on July 20, 2022, Sital Mody,
President of the Midstream Gas Group will succeed Tom as President
of the Gas Group, effective February 1, 2023. Between February 1
and August 1, Tom Martin will serve as Executive Vice President,
working with the Office of the Chairman (OTC).
“I am grateful for the opportunity to serve this great company.
I am immensely proud of the business this team has built, the
strength of the organization and its culture, and the promising
future we have before us. Among our strengths is the great care we
routinely and deliberately take in planning for succession,
including the development of the best leaders for the future of
Kinder Morgan. Kim, Tom, and the rest of the Kinder Morgan team
will lead this company on to even greater things. The best is yet
to come, and I look forward to continuing active involvement with
the company as a member of the Board. I personally also look
forward to having the flexibility to undertake work in other areas
of interest to me in the future,” said Kean.
“Steve has done a superb job as CEO and we thank him for his
dedication and professionalism that have exemplified the high
standards for integrity and transparency that we have established
over the 25-year history of the company,” said Richard D. Kinder,
KMI Executive Chairman. “His competence and honesty are beyond
reproach. While we will be sorry to lose him as our CEO in August,
we are delighted that he will continue to be a director and know he
will contribute in that role to the future success of Kinder
Morgan.”
Kim Dang has been with the company over 20 years, serving as CFO
and then as President for the last 5 years and on the Board of
Directors since 2017. “We have great faith in Kim as Steve’s
successor. She has done an outstanding job as President, is a
collaborative and skillful decision maker and a great leader. Her
experience and many accomplishments over the years make her the
obvious choice as the next CEO of Kinder Morgan,” said Kinder.
Tom Martin has been with Kinder Morgan nearly 20 years, serving
in positions of increasing responsibility, including the last 13
years as President of the Gas Group. Effective August 1, 2023, Tom
will join Rich Kinder, Executive Chairman, and Kim Dang as a member
of the OTC.
“Tom has led the tremendous accomplishments of our natural gas
group. His proven track record of commercial and operational
success in our largest business segment prepares him well for this
role,” added Kinder. “Both Kim and Tom are established company
leaders and we look forward to a smooth transition later this
year.”
Other News
Corporate
- On January 18, the Kinder Morgan board of directors approved an
increase in KMI’s share repurchase authorization from $2.0 billion
to $3.0 billion. Since the program’s inception, KMI has repurchased
approximately $943 million worth of shares at an average price of
$17.40 per share, leaving a remaining capacity of approximately
$2.1 billion.
Natural Gas Pipelines
- Land acquisition and the procurement of materials and
construction contractors continues to progress as planned for the
Permian Highway Pipeline, LLC (PHP) Expansion project. The project
will expand PHP’s capacity by approximately 550 million cubic feet
per day (MMcf/d), increasing natural gas deliveries from the
Permian to U.S. Gulf Coast markets. The target in-service date for
the project is November 1, 2023. PHP is jointly owned by
subsidiaries of KMI, Kinetik Holdings Inc. and Exxon Mobil
Corporation. KMI is the operator of PHP.
- Tennessee Gas Pipeline (TGP) has started construction on two of
the three compressor stations involved in its approximately $263
million East 300 Upgrade project. TGP expects to file for a Notice
to Proceed from the Federal Energy Regulatory Commission (FERC) for
the remaining compressor station in the first quarter of 2023. TGP
has entered into a long-term, binding agreement with Con Edison to
provide approximately 115 MMcf/d of capacity to its distribution
system. The expansion project involves upgrading and adding
compression facilities on TGP’s system. Pending receipt of all
required permits, the project has an expected in-service date of
November 1, 2023.
- On January 13, the bankruptcy court confirmed a plan of
reorganization satisfactory to all interested parties regarding
Ruby Pipeline, L.L.C. (Ruby), which involves payment of Ruby’s
outstanding senior notes with the proceeds from the sale of Ruby to
Tallgrass, a settlement by KMI and Pembina of certain potential
causes of action relating to the bankruptcy, and cash on hand.
KMI’s payment to the bankruptcy estate, net of payments it received
in respect of a long-term subordinated note receivable from Ruby,
was approximately $28.5 million.
- KMI is moving forward with the previously-approved $678 million
Evangeline Pass project after receiving notice and appropriate
credit support from Venture Global to proceed with construction
activities. The two-phase project includes modifications and
enhancements to portions of the TGP and Southern Natural Gas
systems in Mississippi and Louisiana. The project will enable the
delivery of the full FERC-certificated project volumes to Venture
Global’s proposed Plaquemines LNG facility. Pending the receipt of
all required permits, the expected in-service dates will be aligned
with Venture Global’s in-service dates.
Products Pipelines
- KMI’s Southern California renewable diesel hub remains on
target to be fully in service by the end of the first quarter of
2023. The Southern California hub will connect marine and other
delivered renewable diesel supplies in the Los Angeles harbor area
to the Colton and San Diego areas via KMI’s SFPP pipeline. The San
Diego modifications are mechanically complete and construction of
the necessary Colton modifications are progressing on track. The
Southern California renewable diesel hub will accommodate, in
aggregate, up to 20,000 barrels per day (Bbl/d) of blended diesel
throughput across the two inland destination truck racks. This
project is anchored by customer commitments.
- KMI continues to target a first quarter of 2023 in-service for
its Northern California renewable diesel hub. This project will
connect up to 21,000 Bbl/d of Bay area renewable diesel supplies to
the Sacramento, San Jose and Fresno markets via its northern
pipeline system. This Northern California renewable diesel hub will
capitalize on existing infrastructure to allow for a first quarter
in-service, with potential capacity expandability available in
subsequent phases. KMI has secured the necessary customer
commitments and is moving forward with completing the required
system modifications.
- KMI continues construction work at its Carson Terminal to
connect marine supplies of renewable diesel coming into its Los
Angeles harbor hub to its truck rack for delivery of unblended
renewable diesel to local markets. This project is on track to be
in service in late January 2023.
Terminals
- KMI is expanding its industry-leading renewable diesel and
sustainable aviation fuel feedstock storage and logistics offering
in its lower Mississippi River hub, to serve the growing renewable
fuels market. The scope of work at its Geismar River Terminal in
Geismar, Louisiana includes the construction of multiple tanks
totaling approximately 250,000 barrels of heated storage capacity
as well as various marine, rail and pipeline infrastructure
improvements. A new steam-traced and insulated outbound pipeline
connection will strategically position KMI’s facility to meet the
growing feedstock requirement of a customer’s nearby renewable
diesel plant. KMI’s approximately $52 million project, which is
supported by a long-term commercial commitment, is expected to be
in service by the fourth quarter of 2024.
- Tank conversion work is nearing completion on the initial phase
of the renewable feedstock storage and logistics hub under
development at KMI’s Harvey, Louisiana facility. Upon completion of
the project, the facility will serve as a hub in the U.S. where
Neste, a leading provider of renewable diesel and sustainable
aviation fuel, will store a variety of feedstocks such as used
cooking oil. The approximately $80 million project will produce an
attractive return and is supported by a long-term commercial
commitment from Neste. It remains on schedule and is expected to
commence operations in the first quarter of 2023.
- Field work continues on a previously-announced project that
will significantly reduce the emissions profile of KMI’s refined
products terminal hub along the Houston Ship Channel. The
approximately $64 million investment will address emissions related
to product handling activities at KMI’s Galena Park and Pasadena
terminals and will generate an attractive return on invested
capital. The expected Scope 1 & 2 CO2 equivalent emissions
reduction across the combined facilities is approximately 34,000
metric tons per year or a 38% reduction in total facility
greenhouse gas emissions versus 2019 (pre-pandemic) emissions. The
project is expected to be in service by the third quarter of
2023.
Energy Transition Ventures
- KMI has executed a detailed term sheet with the Red Cedar
Gathering Company to provide transportation on KMI’s CO2 pipelines
and permanently sequester captured CO2 at an existing Class II well
in the Permian Basin. Red Cedar is moving forward with a project to
capture CO2 from two natural gas treating facilities in Southern
Colorado (up to 400,000 metric tons per year of CO2) and deliver
the captured CO2 to KMI’s Cortez pipeline. Red Cedar is a joint
venture between the Southern Ute Indian Tribe Growth Fund and KMI,
with an ownership interest of 51% and 49%, respectively.
- Commissioning at the Twin Bridges Landfill will begin in the
first quarter of 2023 and construction is ongoing at Prairie View
and Liberty Landfills, the three sites comprising Kinetrex Energy’s
approximately $150 million landfill-based renewable natural gas
(RNG) projects in Indiana. The sites are expected to be placed in
service throughout 2023 and KMI will begin monetizing renewable
identification numbers (RINs) from the first of the new plants in
the first quarter of 2023. These projects will add approximately
3.5 Bcf to KMI’s total annual RNG gross production upon
completion.
- KMI made a final investment decision to convert Autumn Hills,
one of seven sites included in KMI’s $135 million acquisition of
North American Natural Resources, Inc. and its sister companies
(NANR), to an RNG facility and construction is scheduled to begin
in January 2023. Based on the U.S. EPA’s proposed regulations for
the Renewable Fuels Standards Program allowing for the creation of
e-RINs from biogas used to generate electricity in connection with
electric vehicles, KMI is currently evaluating whether to keep the
remaining six sites dedicated to producing electricity, which could
provide earnings upside opportunities with minimal additional
capital investment, thus improving the net present value of the
investment.
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, 140 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.
Please join Kinder Morgan, Inc. at 4:30 p.m. ET on Wednesday,
January 18 , at www.kindermorgan.com
for a LIVE webcast conference call on the company’s fourth quarter
earnings. An investor presentation update will be posted to the
Investor Relations page of KMI’s website prior to 9:30 a.m. ET on
January 19, 2023.
Non-GAAP Financial
Measures
Our non-GAAP financial measures described 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, unsettled commodity hedges and 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 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 our
ability to generate earnings. We believe the GAAP measure most
directly comparable to Adjusted Earnings is net income attributable
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 share. (See the accompanying Tables 1 and
2.)
DCF is calculated by adjusting net
income 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 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. (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
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 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 our leverage. 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. (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
(NCI),” 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.
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 as part of a ratio of Net
Debt-to-Adjusted EBITDA, 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 total debt as reconciled in
the notes to the accompanying Preliminary Consolidated Balance
Sheets in Table 6.
FCF is calculated by reducing cash
flow from operations for capital expenditures (sustaining and
expansion). FCF is used by external users as an additional leverage
metric. Therefore, we believe FCF is useful to our investors. We
believe the GAAP measure most directly comparable to FCF is cash
flow from operations.
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,” “projects,” 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;
energy transition-related opportunities; KMI’s 2023 expectations;
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. 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;
counterparty financial risk; 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.
Table 1
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Consolidated
Statements of Income
(In millions, except per share
amounts, unaudited)
Three Months Ended
December 31,
% change
Year Ended
December 31,
% change
2022
2021
2022
2021
Revenues
$
4,579
$
4,425
$
19,200
$
16,610
Operating costs, expenses and other
Costs of sales
1,961
1,989
9,255
6,493
Operations and maintenance
695
658
2,655
2,368
Depreciation, depletion and
amortization
554
540
2,186
2,135
General and administrative
167
165
637
655
Taxes, other than income taxes
101
102
441
426
(Gain) loss on divestitures and
impairments, net
(2
)
22
(32
)
1,624
Other income, net
(1
)
(1
)
(7
)
(7
)
Total operating costs, expenses and
other
3,475
3,475
15,135
13,694
Operating income
1,104
950
4,065
2,916
Other income (expense)
Earnings from equity investments
239
199
803
591
Amortization of excess cost of equity
investments
(18
)
(22
)
(75
)
(78
)
Interest, net
(426
)
(370
)
(1,513
)
(1,492
)
Other, net
(8
)
18
55
282
Income before income taxes
891
775
3,335
2,219
Income tax expense
(198
)
(121
)
(710
)
(369
)
Net income
693
654
2,625
1,850
Net income attributable to NCI
(23
)
(17
)
(77
)
(66
)
Net income attributable to Kinder
Morgan, Inc.
$
670
$
637
$
2,548
$
1,784
Class P Shares
Basic and diluted earnings per share
$
0.30
$
0.28
7
%
$
1.12
$
0.78
44
%
Basic and diluted weighted average shares
outstanding
2,248
2,267
(1
) %
2,258
2,266
—
%
Declared dividends per share
$
0.2775
$
0.27
3
%
$
1.11
$
1.08
3
%
Adjusted Earnings (1)
$
708
$
609
16
%
$
2,636
$
3,004
(12
) %
Adjusted Earnings per share (1)
$
0.31
$
0.27
15
%
$
1.16
$
1.32
(12
) %
Note:
(1)
Adjusted Earnings is Net income
attributable to Kinder Morgan, Inc. adjusted for Certain Items, see
Table 2. Adjusted Earnings per share uses Adjusted Earnings and
applies the same two-class method used in arriving at basic
earnings per share.
Table 2
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Net Income
Attributable to Kinder Morgan, Inc. to Adjusted Earnings to DCF
Reconciliation
(In millions,
unaudited)
Three Months Ended
December 31,
% change
Year Ended
December 31,
% change
2022
2021
2022
2021
Net income attributable to Kinder
Morgan, Inc. (GAAP)
$
670
$
637
$
2,548
$
1,784
Total Certain Items
38
(28
)
88
1,220
Adjusted Earnings (1)
708
609
16
%
2,636
3,004
(12
) %
DD&A and amortization of excess cost
of equity investments for DCF (2)
637
627
2,534
2,481
Income tax expense for DCF (1)(2)
221
189
822
943
Cash taxes (2)
(20
)
(13
)
(83
)
(69
)
Sustaining capital expenditures (2)
(320
)
(306
)
(901
)
(864
)
Other items (3)
(9
)
(13
)
(38
)
(35
)
DCF
$
1,217
$
1,093
11
%
$
4,970
$
5,460
(9
) %
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
December 31,
% change
Year Ended
December 31,
% change
2022
2021
2022
2021
Natural Gas Pipelines
$
1,353
$
1,215
11
%
$
4,942
$
5,463
(10
) %
Products Pipelines
252
281
(10
) %
1,107
1,117
(1
) %
Terminals
244
244
—
%
975
950
3
%
CO2
194
158
23
%
808
754
7
%
Adjusted Segment EBDA (1)
2,043
1,898
8
%
7,832
8,284
(5
) %
General and administrative and corporate
charges (1)
(149
)
(158
)
(587
)
(623
)
JV DD&A and income tax expense
(1)(2)
86
81
348
351
Net income attributable to NCI (1)
(23
)
(17
)
(77
)
(66
)
Adjusted EBITDA
1,957
1,804
8
%
7,516
7,946
(5
) %
Interest, net (1)
(391
)
(379
)
(1,524
)
(1,518
)
Cash taxes (2)
(20
)
(13
)
(83
)
(69
)
Sustaining capital expenditures (2)
(320
)
(306
)
(901
)
(864
)
Other items (3)
(9
)
(13
)
(38
)
(35
)
DCF
$
1,217
$
1,093
11
%
$
4,970
$
5,460
(9
) %
Weighted average shares outstanding for
dividends (4)
2,261
2,280
2,271
2,278
DCF per share
$
0.54
$
0.48
13
%
$
2.19
$
2.40
(9
) %
Declared dividends per share
$
0.2775
$
0.27
$
1.11
$
1.08
Notes
(1)
Amounts are adjusted for Certain
Items. See Tables 4 and 7 for more information.
(2)
Includes or represents DD&A,
income tax expense, cash taxes and/or sustaining capital
expenditures (as applicable for each item) from JVs. See Table 7
for more information.
(3)
Includes pension contributions,
non-cash pension expense and non-cash compensation associated with
our restricted stock program.
(4)
Includes restricted stock awards
that participate in dividends.
Table 4
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Net Income
Attributable to Kinder Morgan, Inc. to Adjusted EBITDA
Reconciliation
(In millions,
unaudited)
Three Months Ended
December 31,
% change
Year Ended
December 31,
% change
2022
2021
2022
2021
Net income attributable to Kinder
Morgan, Inc. (GAAP)
$
670
$
637
5
%
$
2,548
$
1,784
43
%
Certain Items:
Fair value amortization
(4
)
(4
)
(15
)
(19
)
Legal, environmental and other
reserves
28
48
51
160
Change in fair value of derivative
contracts (1)
8
(45
)
57
19
Loss on impairments, divestitures and
other write-downs, net (2)
—
20
—
1,535
Income tax Certain Items
(2
)
(52
)
(37
)
(491
)
Other
8
5
32
16
Total Certain Items (3)
38
(28
)
88
1,220
DD&A and amortization of excess cost
of equity investments
572
562
2,261
2,213
Income tax expense (4)
200
173
747
860
JV DD&A and income tax expense
(4)(5)
86
81
348
351
Interest, net (4)
391
379
1,524
1,518
Adjusted EBITDA
$
1,957
$
1,804
8
%
$
7,516
$
7,946
(5
) %
Notes
(1)
Gains or losses are reflected in
our DCF when realized.
(2)
Year ended December 31, 2021
amount primarily includes a pre-tax non-cash impairment loss of
$1,600 million related to our South Texas gathering and processing
assets within our Natural Gas Pipelines business segment reported
within "(Gain) loss on divestitures and impairments, net" and a
pre-tax gain of $206 million associated with the sale of a partial
interest in our equity investment in NGPL Holdings LLC, offset
partially by a write-down of $117 million on a long-term
subordinated note receivable from an equity investee, Ruby Pipeline
Holding Company, L.L.C., reported within "Other, net" and "Earnings
from equity investments," respectively, on the accompanying
Preliminary Consolidated Statement of Income (see Table 1).
(3)
Three months ended December 31,
2022 and 2021 amounts include less than $(3) million and $(5)
million, respectively, and year ended December 31, 2022 and 2021
amounts include $1 million and $124 million, respectively, reported
within “Earnings from equity investments” on the accompanying
Preliminary Consolidated Statements of Income.
(4)
Amounts are adjusted for Certain
Items. See Table 7 for more information.
(5)
Represents JV DD&A and income
tax expense. See Table 7 for more information.
Table 5
Segment Volume and CO2 Segment
Hedges Highlights
(Historical data is pro forma
for acquired and divested assets, JV volumes at KMI share)
Three Months Ended
December 31,
Year Ended
December 31,
2022
2021
2022
2021
Natural Gas Pipelines (1)
Transport volumes (BBtu/d)
40,072
38,527
39,064
38,577
Sales volumes (BBtu/d)
2,366
2,450
2,482
2,473
Gathering volumes (BBtu/d)
3,183
3,005
3,046
2,749
NGLs (MBbl/d) (1)
33
29
30
29
Products Pipelines (MBbl/d)
Gasoline (2)
965
985
978
987
Diesel fuel
360
375
367
390
Jet fuel
268
244
264
223
Total refined product volumes
1,593
1,604
1,609
1,600
Crude and condensate
455
484
471
498
Total delivery volumes (MBbl/d)
2,048
2,088
2,080
2,098
Terminals (1)
Liquids leasable capacity (MMBbl)
77.8
77.8
77.8
77.8
Liquids utilization %
93.3
%
94.8
%
93.3
%
94.8
%
Bulk transload tonnage (MMtons)
13.2
13.5
53.2
51.3
CO2
SACROC oil production
20.82
19.82
19.92
19.88
Yates oil production
6.52
6.91
6.52
6.57
Other
2.55
3.07
2.75
3.25
Total oil production - net (MBbl/d)
(3)
29.89
29.80
29.19
29.70
NGL sales volumes - net (MBbl/d) (3)
9.20
9.54
9.40
9.38
CO2 sales volumes - net (Bcf/d)
0.38
0.34
0.36
0.38
Realized weighted average oil price ($ per
Bbl)
$
65.06
$
54.19
$
66.78
$
52.71
Realized weighted average NGL price ($ per
Bbl)
$
35.26
$
30.23
$
39.59
$
25.39
CO2 Segment Hedges
2023
2024
2025
2026
Crude Oil (4)
Price ($ per Bbl)
$
64.19
$
61.66
$
61.76
$
65.72
Volume (MBbl/d)
22.30
14.14
9.72
4.10
NGLs
Price ($ per Bbl)
$
59.13
Volume (MBbl/d)
3.08
Midland-to-Cushing Basis Spread
Price ($ per Bbl)
$
0.97
Volume (MBbl/d)
17.96
Notes
(1)
Volumes for acquired pipelines
are included for all periods, however, EBDA contributions from
acquisitions are included only for periods subsequent to their
acquisition. Volumes for facilities divested, idled and/or held for
sale 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)
December 31,
December 31,
2022
2021
Assets
Cash and cash equivalents
$
745
$
1,140
Other current assets
3,058
2,689
Property, plant and equipment, net
35,599
35,653
Investments
7,653
7,578
Goodwill
19,965
19,914
Deferred charges and other assets
3,058
3,442
Total assets
$
70,078
$
70,416
Liabilities and Stockholders'
Equity
Short-term debt
$
3,385
$
2,646
Other current liabilities
3,545
3,175
Long-term debt
28,288
29,772
Debt fair value adjustments
115
902
Other
2,631
2,000
Total liabilities
37,964
38,495
Other stockholders' equity
31,144
31,234
Accumulated other comprehensive loss
(402
)
(411
)
Total KMI stockholders' equity
30,742
30,823
Noncontrolling interests
1,372
1,098
Total stockholders' equity
32,114
31,921
Total liabilities and stockholders'
equity
$
70,078
$
70,416
Net Debt (1)
$
30,936
$
31,214
Adjusted EBITDA Twelve Months
Ended
Reconciliation of Net Income
Attributable to Kinder Morgan, Inc. to Adjusted EBITDA
December 31,
December 31,
2022
2021
Net income attributable to Kinder
Morgan, Inc. (GAAP)
$
2,548
$
1,784
Total Certain Items
88
1,220
DD&A and amortization of excess cost
of equity investments
2,261
2,213
Income tax expense (2)
747
860
JV DD&A and income tax expense
(2)(3)
348
351
Interest, net (2)
1,524
1,518
Adjusted EBITDA
$
7,516
$
7,946
Net Debt-to-Adjusted EBITDA
4.1
3.9
Notes
(1)
Amounts calculated as total debt,
less (i) cash and cash equivalents; (ii) debt fair value
adjustments; and (ii) the foreign exchange impact on our Euro
denominated debt of $(8) million and $64 million as of December 31,
2022 and 2021, respectively, as we have entered into swaps to
convert that debt to U.S.$. In March 2022, one series of our Euro
denominated debt matured and as of December 31, 2022, we have one
remaining series of Euro denominated debt outstanding.
(2)
Amounts are adjusted for Certain
Items. See Table 4 for more information.
(3)
Represents JV DD&A and income
tax expense. See Table 7 for more information.
Table 7 (continued)
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Supplemental
Information
(In millions,
unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2022
2021
2022
2021
Segment EBDA
Natural Gas Pipelines (GAAP)
$
1,348
$
1,213
$
4,801
$
3,815
Certain Items
5
2
141
1,648
Natural Gas Pipelines Adjusted Segment
EBDA
1,353
1,215
4,942
5,463
Products Pipelines (GAAP)
252
272
1,107
1,064
Certain Items
—
9
—
53
Products Pipelines Adjusted Segment
EBDA
252
281
1,107
1,117
Terminals (GAAP)
244
219
975
908
Certain Items
—
25
—
42
Terminals Adjusted Segment EBDA
244
244
975
950
CO2 (GAAP)
200
161
819
760
Certain Items
(6
)
(3
)
(11
)
(6
)
CO2 Adjusted Segment EBDA
194
158
808
754
Total Segment EBDA (GAAP)
2,044
1,865
7,702
6,547
Total Segment EBDA Certain Items
(1
)
33
130
1,737
Total Adjusted Segment EBDA
$
2,043
$
1,898
$
7,832
$
8,284
Depreciation, depletion and amortization
(GAAP)
$
(554
)
$
(540
)
$
(2,186
)
$
(2,135
)
Amortization of excess cost of equity
investments (GAAP)
(18
)
(22
)
(75
)
(78
)
DD&A and amortization of excess cost
of equity investments
(572
)
(562
)
(2,261
)
(2,213
)
JV DD&A
(65
)
(65
)
(273
)
(268
)
DD&A and amortization of excess cost
of equity investments for DCF
$
(637
)
$
(627
)
$
(2,534
)
$
(2,481
)
General and administrative (GAAP)
$
(167
)
$
(165
)
$
(637
)
$
(655
)
Corporate benefit
12
7
44
32
Certain Items
6
—
6
—
General and administrative and corporate
charges (1)
$
(149
)
$
(158
)
$
(587
)
$
(623
)
Interest, net (GAAP)
$
(426
)
$
(370
)
$
(1,513
)
$
(1,492
)
Certain Items
35
(9
)
(11
)
(26
)
Interest, net (1)
$
(391
)
$
(379
)
$
(1,524
)
$
(1,518
)
Income tax expense (GAAP)
$
(198
)
$
(121
)
$
(710
)
$
(369
)
Certain Items
(2
)
(52
)
(37
)
(491
)
Income tax expense (1)
(200
)
(173
)
(747
)
(860
)
Unconsolidated JV income tax expense
(1)(2)
(21
)
(16
)
(75
)
(83
)
Income tax expense for DCF (1)
$
(221
)
$
(189
)
$
(822
)
$
(943
)
Net income attributable to NCI (GAAP)
$
(23
)
$
(17
)
$
(77
)
$
(66
)
NCI associated with Certain Items (3)
—
—
—
—
Net income attributable to NCI (1)
$
(23
)
$
(17
)
$
(77
)
$
(66
)
Additional JV information
Unconsolidated JV DD&A
$
(81
)
$
(76
)
$
(323
)
$
(312
)
Less: Consolidated JV partners'
DD&A
(16
)
(11
)
(50
)
(44
)
JV DD&A
(65
)
(65
)
(273
)
(268
)
Unconsolidated JV income tax expense
(1)(2)
(21
)
(16
)
(75
)
(83
)
JV DD&A and income tax expense (1)
$
(86
)
$
(81
)
$
(348
)
$
(351
)
Unconsolidated JV cash taxes (2)
$
(19
)
$
(13
)
$
(70
)
$
(60
)
Unconsolidated JV sustaining capital
expenditures
$
(59
)
$
(35
)
$
(148
)
$
(116
)
Less: Consolidated JV partners' sustaining
capital expenditures
(2
)
(4
)
(8
)
(9
)
JV sustaining capital expenditures
$
(57
)
$
(31
)
$
(140
)
$
(107
)
KMI FCF
Net income attributable to Kinder Morgan,
Inc. (GAAP)
$
670
$
637
$
2,548
$
1,784
Net income attributable to noncontrolling
interests
23
17
77
66
DD&A and amortization of excess cost
of equity investments
572
562
2,261
2,213
Deferred income taxes
193
119
692
355
Earnings from equity investments
(239
)
(199
)
(803
)
(591
)
Distribution of equity investment earnings
(4)
177
185
725
720
Working capital and other items (5)
8
(53
)
(533
)
1,161
Cash flow from operations (GAAP)
1,404
1,268
4,967
5,708
Capital expenditures (GAAP)
(477
)
(387
)
(1,621
)
(1,281
)
FCF
927
881
3,346
4,427
Dividends paid
(628
)
(615
)
(2,504
)
(2,443
)
FCF after dividends
$
299
$
266
$
842
$
1,984
Notes
(1)
Amounts are adjusted for Certain
Items.
(2)
Amounts are associated with our
Citrus, NGPL and Products (SE) Pipe Line equity investments.
(3)
Three months and year ended
December 31, 2021 amounts include less than $1 million of
noncontrolling interests associated with Certain Items.
(4)
Excludes distributions from
equity investment in excess of cumulative earnings of $30 million
and $42 million for the three months ended December 31, 2022 and
2021, respectively, and $156 million and $163 million for the year
ended December 31, 2022 and 2021, respectively. These are included
in cash flows from investing activities on our consolidated
statement of cash flows.
(5)
Includes non-cash impairments
recognized. See Table 4 for more information.
Table 8
Kinder Morgan, Inc. and
Subsidiaries
Reconciliations of Net Income
Attributable to Kinder Morgan, Inc. and DCF Excluding Uri
(In millions,
unaudited)
Year Ended
December 31,
% change
Reconciliation of Net Income
Attributable to Kinder Morgan, Inc. Excluding Uri
2022
2021
Net income attributable to Kinder
Morgan, Inc. (GAAP)
$
2,548
$
1,784
Uri impact to net income attributable to
Kinder Morgan, Inc. (1)
—
(852
)
Net income attributable to Kinder
Morgan, Inc. (Excluding Uri)
$
2,548
$
932
173
%
Reconciliation of DCF Excluding
Uri
DCF
$
4,970
$
5,460
Uri impact to DCF (1)
—
(1,087
)
DCF (Excluding Uri)
$
4,970
$
4,373
14
%
Note
(1)
For a reconciliation of the full year 2021
impact of Winter Storm Uri, see our December Investor Presentation
posted on December 7, 2022 and accessible on our website at:
https://ir.kindermorgan.com/events-and-presentations/default.aspx.
Table 9
Kinder Morgan, Inc. and
Subsidiaries
Reconciliation of Projected
Net Income Attributable to Kinder Morgan, Inc. to Projected
DCF
(In billions,
unaudited)
2023 Projected
Guidance
Net income attributable to Kinder Morgan,
Inc. (GAAP)
$
2.5
Total Certain Items (1)
—
DD&A and amortization of excess cost
of equity investments for DCF (2)
2.5
Income tax expense for DCF (2)(3)
0.8
Cash taxes (2)
(0.1
)
Sustaining capital expenditures (2)
(1.0
)
Other items (4)
0.1
DCF
$
4.8
Table 10
Kinder Morgan, Inc. and
Subsidiaries
Reconciliation of Projected
Net Income Attributable to Kinder Morgan, Inc. to Projected
Adjusted EBITDA
(In billions,
unaudited)
2023 Projected
Guidance
Net income attributable to Kinder
Morgan, Inc. (GAAP)
$
2.5
Total Certain Items (1)
—
DD&A and amortization of excess cost
of equity investments
2.3
Income tax expense (3)
0.7
JV DD&A and income tax expense (2)
0.3
Interest, net (3)
1.9
Adjusted EBITDA
$
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 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/20230118005792/en/
Dave Conover Media Relations Newsroom@kindermorgan.com
Investor Relations (800) 348-7320 km_ir@kindermorgan.com
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Kinder Morgan (NYSE:KMI)
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From Apr 2023 to Apr 2024