Increases Dividend For Sixth Consecutive
Year
Kinder Morgan, Inc.’s (NYSE: KMI) board of directors today
approved a cash dividend of $0.2825 per share for the first quarter
($1.13 annualized), payable on May 15, 2023, to stockholders of
record as of the close of business on May 1, 2023. This dividend is
a 2% increase over the first quarter of 2022.
The company is reporting first quarter net income attributable
to KMI of $679 million, compared to $667 million in the first
quarter of 2022; and distributable cash flow (DCF) of $1,374
million, compared to $1,455 million in the first quarter of 2022.
Adjusted Earnings were $675 million for the quarter, versus $732
million in the first quarter of 2022.
“For the sixth year in a row, we are very pleased to announce
another increase in the dividend we provide our shareholders,” said
Executive Chairman Richard D. Kinder. “Shareholders continue to
benefit from our long-standing corporate strategy: maintaining a
strong investment-grade balance sheet, internally funding expansion
opportunities, paying an attractive and growing dividend, and
further returning value by repurchasing our shares on an
opportunistic basis. In addition to increasing the dividend this
quarter, the company repurchased approximately 6.8 million shares
for $113 million at an average price of $16.62 per share.”
“Our extensive and interconnected network continued to generate
strong earnings this quarter, particularly in our Natural Gas
Pipelines and Terminals business segments,” said Chief Executive
Officer Steve Kean. “Our natural gas pipeline network is composed
of some 70,000 miles of interstate and intrastate pipelines that
move about 40% of U.S. natural gas production, along with 700
billion cubic feet (Bcf) of natural gas storage, comprising 15% of
total U.S. natural gas storage capacity.
“While the U.S. Congress debates much-needed infrastructure
permitting reform, the system we operate under today makes it
difficult to permit new natural gas pipelines in much of the
country. That in turn increases the value of our existing natural
gas pipeline systems, which results in a favorable recontracting
environment,” continued Kean. “With a large portion of our existing
natural gas pipeline network in Texas and Louisiana, we also
benefit from our ability to expand to meet growing demand in the
most infrastructure-friendly region of the country. In addition,
our Products Pipelines and Terminals business segments benefit from
built-in escalators in their tariffs and contracts.
“We are also continuing to execute on capital-efficient
expansions of our existing natural gas pipeline systems. This
quarter we made good progress on two such expansions. One will add
approximately 550 million cubic feet per day (MMcf/d) of capacity
to the Permian Highway Pipeline (PHP) system through additional
compression with minimal new pipeline build. The other will
increase capacity and reliability of services to Con Edison, a key
business partner, by upgrading and adding compression facilities on
the Tennessee Gas Pipeline (TGP) system in a critical region of the
country.
“The company started the year strong, generating robust earnings
and solid coverage of this quarter’s increased dividend. We
generated earnings per share of $0.30 and DCF per share of $0.61,”
said KMI President Kim Dang. “Despite higher interest expense
versus the first quarter of 2022, earnings per share for the
quarter were up 3%. DCF per share was down 5% as compared to the
first quarter of 2022. In addition to higher interest expense, DCF
was also impacted by higher sustaining capital expenditures versus
the prior year period.
“KMI’s balance sheet is strong, as we ended the first quarter
with a Net Debt-to-Adjusted EBITDA ratio of 4.1 times, well below
our target of approximately 4.5 times. Our project backlog at the
end of the first quarter was $3.7 billion, up $400 million versus
the fourth quarter of 2022. The most significant additions were
$324 million in interstate natural gas pipeline expansion projects,
including a project on the TGP system to assist a customer in
retiring a coal-fired power generation facility. Excluding the CO2
business segment, where we have higher return thresholds than our
other projects, we expect the remaining $3.3 billion in projects in
the backlog to generate an average Project EBITDA multiple of
approximately 3.5 times.
“With continued strong emphasis on our base business, we are
also devoting roughly 86% of our project backlog to lower-carbon
energy services, including natural gas as a substitute for higher
emitting fuels, producer certified natural gas, renewable natural
gas (RNG), renewable diesel (RD), and feedstocks associated with RD
and sustainable aviation fuel,” continued Dang. “During the
quarter, we made excellent progress on several projects in that
category. Our Products Pipelines business segment finished work on
new RD hubs in Northern and Southern California. Our Terminals
business segment celebrated a ribbon-cutting at its renewable
feedstock storage and logistics hub at KMI’s Harvey, Louisiana
facility. That group also began work on providing new RD and
sustainable aviation fuel feedstock storage and logistics services
at our Geismar River Terminal in Geismar, Louisiana,” continued
Dang.
“Further, our Energy Transition Ventures group is commissioning
the Twin Bridges landfill RNG facility and is making good progress
constructing the Liberty and Prairie View RNG facilities, as well
as on converting the Autumn Hills facility to RNG production. All
of these projects are making good on the commitment that our pivot
in the energy evolution will be gradual and done at attractive
returns for our shareholders.”
2023 Outlook
For 2023, KMI budgeted net income attributable to KMI of $2.5
billion ($1.12 per share) and expects to declare dividends of $1.13
per share, a 2% increase from the dividends declared for 2022. The
company also budgeted 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.
At this early stage in the year, we are leaving our 2023 budget
guidance in place. So far, crude oil and natural gas prices have
been below our full year 2023 budget assumptions of $85 and $5.50
respectively, with strong performance in our overall business
expected to substantially offset the weaker pricing to date and the
forward curve for the balance of the year.
This press release includes Adjusted Earnings and DCF, in each
case in the aggregate and per share, Adjusted Segment EBDA,
Adjusted EBITDA, Net Debt, free cash flow (FCF) and Project EBITDA,
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 preliminary financial statements.
Overview of Business
Segments
“The Natural Gas Pipelines business segment’s financial
performance was up in the first quarter of 2023 relative to the
first quarter of 2022, primarily on higher contributions from our
Texas Intrastate system, from Midcontinent Express Pipeline, from
El Paso Natural Gas (EPNG) and from most of our gathering system
assets,” said Dang.
Natural gas transport volumes were up 3% compared to the first
quarter of 2022, primarily from increases on EPNG due to returning
a pipeline to service, cooler weather, and the retirement of a
coal-fired power plant. Natural gas gathering volumes were up 18%
from the first quarter of 2022 primarily from our Haynesville and
Eagle Ford systems.
“Contributions from the Products Pipelines business
segment were down compared to the first quarter of 2022 largely due
to the impact in the prior year period of sharply rising commodity
prices, primarily impacting our transmix business, as well as a
gain on a land sale. Results were also impacted by lower volumes in
our crude and condensate business, down 5% in total, primarily on
Double H Pipeline due to unfavorable basis differentials, while
total refined products volumes were flat compared to the first
quarter of 2022. The crude and condensate business was also
impacted by lower recontracting rates in the Eagle Ford. These were
partially offset by rate escalations across numerous assets,” Dang
said. “Gasoline volumes were above the comparable period last year
by 1% and diesel volumes were down 11%. Jet fuel volumes continued
their strong rebound, up 12% versus the first quarter of 2022.
“Terminals business segment earnings were up compared to
the first quarter of 2022. Our bulk business benefited from rate
escalations and continued strength in volumes for export coal and
petroleum coke as well as higher steel volumes compared to the
prior year period. Our liquids business was up modestly on
contributions from growth projects placed in service and higher
utilization at our Carteret, New Jersey refined products storage
facility,” continued Dang. “Earnings contributions from our Jones
Act tanker business were higher compared to the first quarter of
2022 on higher average charter rates, as the market continued to
strengthen during the quarter due to improving supply and demand
fundamentals. The fleet is fully contracted under term charter
agreements.”
“CO2 business segment earnings were down compared to the
first quarter of 2022, primarily due to lower realized natural gas
liquids (NGL) and CO2 prices, as well as lower NGL, CO2 and crude
volumes. Our realized weighted average crude oil price for the
quarter was relatively flat at $67.15 per barrel, while our
weighted average NGL price for the quarter was down 22% from the
first quarter of 2022 at $34.06 per barrel, and CO2 prices were
down $0.30 or 19%,” said Dang. “First quarter 2023 combined net oil
production across our fields was down 2% compared to the same
period in 2022. Crude volumes for the quarter would have exceeded
plan but for an extended outage at SACROC. NGL sales volumes net to
KMI were down 13% versus the first quarter of 2022, also primarily
due to the outage. CO2 sales volumes were down 3% on a net-to-KMI
basis compared to the first quarter of 2022.”
Other News
Corporate
- In January 2023, KMI issued $1.5 billion of 5.20% senior notes
due June 2033 to repay maturing debt and for general corporate
purposes. The 5.20% rate on the notes was better than budgeted for
that issuance.
- During the first quarter of 2023, KMI executed additional
secured overnight financing rate, or SOFR, locks and now has $3,445
million, or approximately 50% of its floating rate exposure, locked
for the balance of 2023 at rates slightly favorable to budget.
- During the quarter, KMI repurchased approximately 6.8 million
shares for $113 million at an average price of $16.62 per share,
leaving $1.94 billion in remaining capacity for additional share
repurchases.
Natural Gas Pipelines
- Construction is underway to expand PHP’s capacity by
approximately 550 MMcf/d, increasing natural gas deliveries from
the Permian to U.S. Gulf Coast markets. The project is progressing
well; however, supply chain constraints for certain components and
materials are causing a delay, pushing expected in-service to
December 2023. We are working with our vendors and suppliers to
minimize the delay to provide this critical additional natural gas
takeaway out of the Permian Basin as soon as possible. PHP is
jointly owned by subsidiaries of KMI, Kinetik Holdings Inc. and
Exxon Mobil Corporation. KMI is the operator of PHP.
- Construction activities are underway on all three of the
compressor stations involved in TGP’s approximately $263 million
East 300 Upgrade project. TGP recently began construction
activities on the remaining compressor station after receiving its
Notice to Proceed from the Federal Energy Regulatory Commission on
February 3, 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.
- Permitting activities are underway on a $180 million TGP
project that includes a new 32-mile pipeline to transport
approximately 245 MMcf/d of natural gas from the existing TGP
system to TVA’s proposed 1,450 megawatt generation facility at an
existing site in Cumberland, Tennessee. The new generation facility
supports TVA’s initiative to build the energy system of the future,
focusing on cleaner energy that provides low-cost, reliable
electricity to the Tennessee Valley. Pending the receipt of all
required permits and clearances, the TGP project has an expected
in-service date of September 1, 2025.
Products Pipelines
- KMI’s Southern and Northern California RD hubs were placed in
commercial operation on April 3, 2023. These hubs are now the most
efficient and least carbon intensive method of transporting RD from
the Los Angeles refinery basin to San Diego and the Inland Empire
and from the San Francisco Bay area to Sacramento, San Jose and
Fresno. These initial phases of both hubs are fully subscribed with
customer commitments.
Terminals
- Detailed engineering and design work has commenced on KMI’s
latest expansion to the company’s industry-leading RD and
sustainable aviation fuel feedstock storage and logistics offering
in its lower Mississippi River hub. 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. The 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.
- Commissioning activities have commenced on significant portions
of the renewable feedstock storage and logistics hub at KMI’s
Harvey, Louisiana facility. A majority of the tanks involved in the
initial phase of the project have been placed in service, with the
balance to follow in the coming weeks. Upon completion, the
facility will serve as a hub in the U.S. where Neste, a leading
provider of RD and sustainable aviation fuel, will store a variety
of feedstocks such as used cooking oil. This approximately $80
million project will produce an attractive return and is supported
by a long-term commercial commitment from Neste.
- 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
- The Twin Bridges landfill RNG facility is in the final stage of
commissioning and is expected to be placed in service in the coming
weeks. KMI will begin monetizing renewable identification numbers
(RINs) from Twin Bridges in the third quarter of 2023. Together
with the Indiana RNG projects under construction at the Liberty and
Prairie View landfills, which are expected to be completed in the
coming months, these three projects will add approximately 3.9 Bcf
to KMI’s total annual RNG capacity upon completion.
- KMI continues to make progress on its previously announced
conversion of Autumn Hills to an RNG facility, with permitting and
engineering design underway. The site is expected to be placed in
service in the second quarter of 2024 and generate an additional
0.65 Bcf of RNG annually. The U.S. EPA’s proposed regulations for
the Renewable Fuels Standards Program allow for the creation of
e-RINs from biogas used to generate electricity in connection with
electric vehicles. In light of those regulations, KMI is evaluating
whether to keep other sites that the company initially planned to
convert to RNG dedicated to producing electricity instead. Doing so
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 82,000 miles of pipelines, 140 terminals, 700
billion cubic feet of working natural gas storage capacity and have
renewable natural gas generation capacity of approximately 2.3 Bcf
per year with an additional 4.6 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 work advancing energy
solutions on the lower carbon initiatives page at
www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. ET on Wednesday,
April 19, at www.kindermorgan.com for a LIVE webcast conference
call on the company’s first quarter earnings.
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
our consolidated non-GAAP financial measures by reviewing our
comparable GAAP measures identified in the descriptions of
consolidated non-GAAP measures below, understanding the differences
between the measures and taking this information into account in
its analysis and its decision-making processes.
Certain Items, as adjustments used
to calculate our non-GAAP financial measures, are items that are
required by GAAP to be reflected in net income attributable to
Kinder Morgan, Inc., but typically either (1) do not have a cash
impact (for example, unsettled commodity hedges and asset
impairments), or (2) by their nature are separately identifiable
from our normal business operations and in most cases are likely to
occur only sporadically (for example, certain legal settlements,
enactment of new tax legislation and casualty losses). (See the
accompanying Tables 2, 3, and 6.) We also include adjustments
related to joint ventures (see “Amounts from
Joint Ventures” below). The following table summarizes our
Certain Items for the three months ended March 31, 2023 and
2022.
Three Months Ended
March 31,
2023
2022
(In millions)
Certain Items
Fair value amortization
$
(4
)
$
(4
)
Change in fair value of derivative
contracts (1)
(68
)
82
Loss on impairment
67
—
Income tax Certain Items (2)
1
(20
)
Other
—
7
Total Certain Items (3)(4)
$
(4
)
$
65
Notes
(1)
Gains or losses are reflected when
realized.
(2)
Represents the income tax provision on
Certain Items plus discrete income tax items. Includes the impact
of KMI’s income tax provision on Certain Items affecting earnings
from equity investments and is separate from the related tax
provision recognized at the investees by the joint ventures which
are also taxable entities.
(3)
2023 and 2022 amounts include the
following amounts included within “Earnings from equity
investments” on the accompanying Preliminary Consolidated
Statements of Income: (i) $(2) million and $5 million,
respectively, included within "Change in fair value of derivative
contracts" and (ii) for the 2023 period only, $67 million included
within "Loss on impairment" for a non-cash impairment related to
our investment in Double Eagle Pipeline LLC in our Products
Pipelines business segment.
(4)
2023 and 2022 amounts include, in
aggregate, $(8) million and $(44) million, respectively, included
within "Interest, net" on the accompanying Preliminary Consolidated
Statements of Income which consist of $(4) million in each period
of "Fair value amortization" and $(4) million and $(40) million,
respectively, of "Change in fair value of derivative
contracts."
Adjusted Earnings is calculated by
adjusting net income attributable to Kinder Morgan, Inc. for
Certain Items. Adjusted Earnings is used by us, investors and other
external users of our financial statements as a supplemental
measure that provides decision-useful information regarding our
period-over-period performance and ability to generate earnings
that are core to our ongoing operations. 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, and
further for DD&A and amortization of excess cost of equity
investments, income tax expense, cash taxes, sustaining capital
expenditures and other items. We also adjust amounts from joint
ventures for income taxes, DD&A, cash taxes and sustaining
capital expenditures (see “Amounts from Joint
Ventures” below). DCF is a significant performance measure
used by us, investors and other external users of our financial
statements to evaluate our performance and to measure and estimate
the ability of our assets to generate economic earnings after
paying interest expense, paying cash taxes and expending sustaining
capital. DCF provides additional insight into the specific costs
associated with our assets in the current period and facilitates
period-to-period comparisons of our performance from ongoing
business activities. DCF is also used by us and external users to
compare the performance of companies across our industry. DCF per
share serves as the primary financial performance target for
purposes of annual bonuses under our annual incentive compensation
program and for performance-based vesting of equity compensation
grants under our long-term incentive compensation program. DCF
should not be used as an alternative to net cash provided by
operating activities computed under GAAP. We believe the GAAP
measure most directly comparable to DCF is net income attributable
to Kinder Morgan, Inc. DCF per share is DCF divided by average
outstanding shares, including restricted stock awards that
participate in dividends. (See the accompanying Table 2.)
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. We believe Adjusted Segment EBDA is a useful
performance metric because it provides management, investors and
other external users of our financial statements additional insight
into performance trends across our business segments, our segments’
relative contributions to our consolidated performance and the
ability of our segments to generate earnings on an ongoing basis.
Adjusted Segment EBDA is also used as a factor in determining
compensation under our annual incentive compensation program for
our business segment presidents and other business segment
employees. 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. (See the accompanying Table
4.)
Adjusted EBITDA is calculated by
adjusting net income attributable to Kinder Morgan, Inc. before
interest expense, income taxes, DD&A, and amortization of
excess cost of equity investments (EBITDA) for Certain Items. We
also include amounts from joint ventures for income taxes and
DD&A (see “Amounts from Joint
Ventures” below). Adjusted EBITDA (on a rolling 12-months
basis) is used by management, investors and other external users,
in conjunction with our Net Debt (as described further below), to
evaluate our leverage. Management and external users also use
Adjusted EBITDA as an important metric to compare the valuations of
companies across our industry. Our ratio of Net Debt-to-Adjusted
EBITDA is used as a supplemental performance target for purposes of
our annual incentive compensation program. We believe the GAAP
measure most directly comparable to Adjusted EBITDA is net income
attributable to Kinder Morgan, Inc. (See the accompanying Tables 3
and 6.)
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; further, we remove
the portion of these adjustments attributable to non-controlling
interests. (See Tables 2, 3, and 6.) 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 in conjunction with our Adjusted
EBITDA (on a rolling 12-months basis) as part of a ratio of Net
Debt-to-Adjusted EBITDA, is a non-GAAP financial measure that is
used by management, investors and other external users of our
financial information to evaluate our leverage. Our ratio of Net
Debt-to-Adjusted EBITDA is also used as a supplemental performance
target for purposes of our annual incentive compensation program.
We believe the most comparable measure to Net Debt is total debt as
reconciled in the notes to the accompanying Preliminary
Consolidated Balance Sheets in Table 6.
Project EBITDA is calculated for an
individual capital project as earnings before interest expense,
taxes, DD&A and general and administrative expenses
attributable to such project, or for JV projects, consistent with
the methods described above under “Amounts from Joint Ventures,”
and in conjunction with capital expenditures for the project, is
the basis for our Project EBITDA multiple. Management, investors
and others use Project EBITDA to evaluate our return on investment
for capital projects before expenses that are generally not
controllable by operating managers in our business segments. We
believe the GAAP measure most directly comparable to Project EBITDA
is the portion of net income attributable to a capital project. We
do not provide the portion of budgeted net income attributable to
individual capital projects (the GAAP financial measure most
directly comparable to Project EBITDA) due to the impracticality of
predicting, on a project-by-project basis through the second full
year of operations, certain amounts required by GAAP, such as
projected commodity prices, unrealized gains and losses on
derivatives marked to market, and potential estimates for certain
contingent liabilities associated with the project completion.
FCF is calculated by reducing cash
flow from operations for capital expenditures (sustaining and
expansion), and FCF after dividends is calculated by further
reducing FCF for dividends paid during the period. FCF is used by
management, investors and other external users as an additional
leverage metric, and FCF after dividends provides additional
insight into cash flow generation. Therefore, we believe FCF is
useful to our investors. We believe the GAAP measure most directly
comparable to FCF is cash flow from operations. (See the
accompanying Table 7.)
Important Information Relating to
Forward-Looking Statements
This news release includes forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995 and Section 21E of the Securities Exchange Act of 1934.
Generally the words “expects,” “believes,” “anticipates,” “plans,”
“will,” “shall,” “estimates,” “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 evolution-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, 2022 (under the headings “Risk Factors” and
“Information Regarding Forward-Looking Statements” and elsewhere),
and its subsequent reports, which are available through the SEC’s
EDGAR system at www.sec.gov and on our website at
ir.kindermorgan.com. Forward-looking statements speak only as of
the date they were made, and except to the extent required by law,
KMI undertakes no obligation to update any forward-looking
statement because of new information, future events or other
factors. Because of these risks and uncertainties, readers should
not place undue reliance on these forward-looking statements.
Table 1
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Consolidated
Statements of Income
(In millions, except per share
amounts, unaudited)
Three Months Ended
March 31,
% change
2023
2022
Revenues
$
3,888
$
4,293
Operating costs, expenses and other
Costs of sales (exclusive of items shown
separately below)
1,215
1,894
Operations and maintenance
639
585
Depreciation, depletion and
amortization
565
538
General and administrative
166
156
Taxes, other than income taxes
110
111
Gain on divestitures and impairments,
net
—
(10
)
Other income, net
(1
)
(5
)
Total operating costs, expenses and
other
2,694
3,269
Operating income
1,194
1,024
Other income (expense)
Earnings from equity investments
165
187
Amortization of excess cost of equity
investments
(17
)
(19
)
Interest, net
(445
)
(333
)
Other, net
2
19
Income before income taxes
899
878
Income tax expense
(196
)
(194
)
Net income
703
684
Net income attributable to NCI
(24
)
(17
)
Net income attributable to Kinder
Morgan, Inc.
$
679
$
667
Class P Shares
Basic and diluted earnings per share
$
0.30
$
0.29
3
%
Basic and diluted weighted average shares
outstanding
2,247
2,267
(1
)%
Declared dividends per share
$
0.2825
$
0.2775
2
%
Adjusted Earnings (1)
$
675
$
732
(8
)%
Adjusted Earnings per share (1)
$
0.30
$
0.32
(6
)%
Notes
(1)
Adjusted Earnings is Net income
attributable to Kinder Morgan, Inc. adjusted for Certain Item; see
Table 2 for a reconciliation. 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 and DCF
Reconciliations
(In millions, except per share
amounts, unaudited)
Three Months Ended
March 31,
% change
Preliminary Net Income Attributable to
Kinder Morgan, Inc. to Adjusted Earnings
2023
2022
Net income attributable to Kinder
Morgan, Inc.
$
679
$
667
2
%
Certain Items (1)
Fair value amortization
(4
)
(4
)
Change in fair value of derivative
contracts
(68
)
82
Loss on impairment
67
—
Income tax Certain Items
1
(20
)
Other
—
7
Total Certain Items
(4
)
65
(106
)%
Adjusted Earnings
$
675
$
732
(8
)%
Preliminary Net Income Attributable to
Kinder Morgan, Inc. to DCF
Net income attributable to Kinder
Morgan, Inc.
$
679
$
667
2
%
Total Certain Items (2)
(4
)
65
(106
)%
DD&A
565
538
Amortization of excess cost of equity
investments
17
19
Income tax expense (3)
195
214
Cash taxes
(1
)
(1
)
Sustaining capital expenditures
(156
)
(115
)
Amounts from joint ventures
Unconsolidated JV DD&A
81
77
Remove consolidated JV partners'
DD&A
(16
)
(11
)
Unconsolidated JV income tax expense
(4)(5)
26
21
Unconsolidated JV cash taxes (4)
—
—
Unconsolidated JV sustaining capital
expenditures
(29
)
(12
)
Remove consolidated JV partners'
sustaining capital expenditures
2
2
Other items (6)
15
(9
)
DCF
$
1,374
$
1,455
(6
)%
Weighted average shares outstanding for
dividends (7)
2,260
2,280
DCF per share
$
0.61
$
0.64
(5
)%
Declared dividends per share
$
0.2825
$
0.2775
Notes
(1)
See table included in "Non-GAAP Financial
Measures—Certain Items."
(2)
See "Preliminary Net Income Attributable
to Kinder Morgan, Inc. to Adjusted Earnings" above for a detailed
listing.
(3)
To avoid duplication, 2023 and 2022
adjustments for income tax expense exclude $1 million and $(20)
million, respectively, which amounts are already included within
“Certain Items.” See table included in “Non-GAAP Financial
Measures—Certain Items."
(4)
Associated with our Citrus, NGPL and
Products (SE) Pipe Line equity investments.
(5)
Includes the tax provision on Certain
Items recognized by the investees that are taxable entities. The
impact of KMI’s income tax provision on Certain Items affecting
earnings from equity investments is included within “Certain Items”
above. See table included in “Non-GAAP Financial Measures—Certain
Items."
(6)
Includes non-cash pension expense,
non-cash compensation associated with our restricted stock program
and pension contributions.
(7)
Includes restricted stock awards that
participate in dividends.
Table 3
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Net Income
Attributable to Kinder Morgan, Inc. to Adjusted EBITDA
Reconciliation
(In millions,
unaudited)
Three Months Ended
March 31,
% change
2023
2022
Net income attributable to Kinder
Morgan, Inc.
$
679
$
667
2
%
Certain Items (1)
Fair value amortization
(4
)
(4
)
Change in fair value of derivative
contracts
(68
)
82
Loss on impairment
67
—
Income tax Certain Items
1
(20
)
Other
—
7
Total Certain Items
(4
)
65
DD&A
565
538
Amortization of excess cost of equity
investments
17
19
Income tax expense (2)
195
214
Interest, net (3)
453
377
Amounts from joint ventures
Unconsolidated JV DD&A
81
77
Remove consolidated JV partners'
DD&A
(16
)
(11
)
Unconsolidated JV income tax expense
(4)
26
21
Adjusted EBITDA
$
1,996
$
1,967
1
%
Notes
(1)
See table included in "Non-GAAP Financial
Measures—Certain Items."
(2)
To avoid duplication, 2023 and 2022
adjustments for income tax expense exclude $1 million and $(20)
million, respectively, which amounts are already included within
“Certain Items.” See table included in “Non-GAAP Financial
Measures—Certain Items."
(3)
To avoid duplication, 2023 and 2022
adjustments for interest, net exclude $(8) million and $(44)
million, respectively, which amounts are already included within
“Certain Items.” See table included in “Non-GAAP Financial
Measures—Certain Items."
(4)
Includes the tax provision on Certain
Items recognized by the investees that are taxable entities
associated with our Citrus, NGPL and Products (SE) Pipe Line equity
investments. The impact of KMI’s income tax provision on Certain
Items affecting earnings from equity investments is included within
“Certain Items” above.
Table 4
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Reconciliation of
Segment EBDA to Adjusted Segment EBDA
(In millions,
unaudited)
Three Months Ended
March 31,
2023
2022
Segment EBDA (1)
Natural Gas Pipelines Segment EBDA
$
1,495
$
1,184
Certain Items (2)
Change in fair value of derivative
contracts
(65
)
106
Other
—
7
Natural Gas Pipelines Adjusted Segment
EBDA
$
1,430
$
1,297
Products Pipelines Segment EBDA
$
184
$
299
Certain Items (2)
Loss on impairment
67
—
Products Pipelines Adjusted Segment
EBDA
$
251
$
299
Terminals Segment EBDA
$
254
$
238
CO2 Segment EBDA
$
172
$
192
Certain Items (2)
Change in fair value of derivative
contracts
1
16
CO2 Adjusted Segment EBDA
$
173
$
208
Notes
(1)
Includes revenues, earnings from equity
investments, operating expenses, gain on divestitures and
impairments, net, other income, net, and other, net. Operating
expenses include costs of sales, operations and maintenance
expenses, and taxes, other than income taxes. The composition of
Segment EBDA is not addressed nor prescribed by generally accepted
accounting principles.
(2)
See "Non-GAAP Financial Measures—Certain
Items."
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
March 31,
2023
2022
Natural Gas Pipelines (1)
Transport volumes (BBtu/d)
40,400
39,319
Sales volumes (BBtu/d)
2,117
2,515
Gathering volumes (BBtu/d)
3,325
2,817
NGLs (MBbl/d) (1)
35
32
Products Pipelines (MBbl/d)
Gasoline (2)
948
940
Diesel fuel
328
369
Jet fuel
271
242
Total refined product volumes
1,547
1,551
Crude and condensate
460
486
Total delivery volumes (MBbl/d)
2,007
2,037
Terminals (1)
Liquids leasable capacity (MMBbl)
78.3
78.2
Liquids leased capacity %
92.8
%
90.6
%
Bulk transload tonnage (MMtons)
13.4
13.0
CO2
SACROC oil production
18.90
19.27
Yates oil production
6.74
6.79
Other
2.61
2.91
Total oil production - net (MBbl/d)
(3)
28.25
28.97
NGL sales volumes - net (MBbl/d) (3)
8.16
9.41
CO2 sales volumes - net (Bcf/d)
0.36
0.37
Realized weighted average oil price ($ per
Bbl)
$
67.15
$
66.90
Realized weighted average NGL price ($ per
Bbl)
$
34.06
$
43.68
CO2 Segment Hedges
Remaining
2023
2024
2025
2026
2027
Crude Oil (4)
Price ($ per Bbl)
$
64.67
$
62.45
$
61.98
$
65.32
$
62.23
Volume (MBbl/d)
23.57
15.50
10.05
5.30
0.50
NGLs
Price ($ per Bbl)
$
55.11
$
36.23
Volume (MBbl/d)
3.82
0.04
Midland-to-Cushing Basis Spread
Price ($ per Bbl)
$
1.00
$
1.15
Volume (MBbl/d)
21.00
2.75
Argus Calendar Monthly Average Basis
Spread
Price ($ per Bbl)
$
0.91
$
0.43
Volume (MBbl/d)
21.25
2.50
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)
March 31,
December 31,
2023
2022
Assets
Cash and cash equivalents
$
416
$
745
Other current assets
2,280
3,058
Property, plant and equipment, net
35,639
35,599
Investments
7,616
7,653
Goodwill
19,965
19,965
Deferred charges and other assets
3,015
3,058
Total assets
$
68,931
$
70,078
Liabilities and Stockholders'
Equity
Short-term debt
$
2,160
$
3,385
Other current liabilities
2,615
3,545
Long-term debt
29,139
28,288
Debt fair value adjustments
207
115
Other
2,696
2,631
Total liabilities
36,817
37,964
Other stockholders' equity
31,098
31,144
Accumulated other comprehensive loss
(341
)
(402
)
Total KMI stockholders' equity
30,757
30,742
Noncontrolling interests
1,357
1,372
Total stockholders' equity
32,114
32,114
Total liabilities and stockholders'
equity
$
68,931
$
70,078
Net Debt (1)
$
30,884
$
30,936
Adjusted EBITDA Twelve Months
Ended (2)
Reconciliation of Net Income
Attributable to Kinder Morgan, Inc. to Last Twelve Months Adjusted
EBITDA
March 31,
December 31,
2023
2022
Net income attributable to Kinder
Morgan, Inc.
$
2,560
$
2,548
Total Certain Items (3)
18
88
DD&A
2,213
2,186
Amortization of excess cost of equity
investments
73
75
Income tax expense (4)
728
747
Interest, net (4)
1,599
1,524
Amounts from joint ventures
Unconsolidated JV DD&A
327
323
Less: Consolidated JV partners'
DD&A
(54
)
(50
)
Unconsolidated JV income tax expense
81
75
Adjusted EBITDA
$
7,545
$
7,516
Net Debt-to-Adjusted EBITDA
4.1
4.1
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
$(1) million and $(8) million as of March 31, 2023 and December 31,
2022, respectively, as we have entered into swaps to convert that
debt to U.S.$.
(2)
Reflects the rolling 12-month amounts for
each period above.
(3)
See table included in "Non-GAAP Financial
Measures—Certain Items."
(4)
Amounts are adjusted for Certain Items.
See "Non-GAAP Financial Measures—Certain Items" for more
information.
Table 7
Kinder Morgan, Inc. and
Subsidiaries
Preliminary Supplemental
Information
(In millions,
unaudited)
Three Months Ended
March 31,
2023
2022
KMI FCF
Net income attributable to Kinder Morgan,
Inc.
$
679
$
667
Net income attributable to noncontrolling
interests
24
17
DD&A
565
538
Amortization of excess cost of equity
investments
17
19
Deferred income taxes
190
190
Earnings from equity investments
(165
)
(187
)
Distribution of equity investment earnings
(1)
188
165
Working capital and other items (2)
(165
)
(325
)
Cash flow from operations
1,333
1,084
Capital expenditures (GAAP)
(507
)
(407
)
FCF
826
677
Dividends paid
(627
)
(616
)
FCF after dividends
$
199
$
61
Notes
(1)
Excludes distributions from equity
investments in excess of cumulative earnings of $61 million and $50
million for the three months ended March 31, 2023 and 2022,
respectively. These are included in cash flows from investing
activities on our consolidated statement of cash flows.
(2)
Includes non-cash impairments recognized.
See table included in "Non-GAAP Financial Measures—Certain Items"
for more information.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230419005809/en/
Dave Conover Media Relations Newsroom@kindermorgan.com
Investor Relations (800) 348-7320 km_ir@kindermorgan.com
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