Approves Cash Dividend of $0.2825 Per Share
($1.13 Annualized)
Sees Strong Performance Across its Portfolio
of Assets
Kinder Morgan, Inc.’s (NYSE: KMI) board of directors today
approved a cash dividend of $0.2825 per share for the third quarter
($1.13 annualized), payable on November 15, 2023, to stockholders
of record as of the close of business on October 31, 2023. This
dividend is a 2% increase over the third quarter of 2022.
The company is reporting:
- Third quarter earnings per share (EPS) of $0.24 was down
slightly and distributable cash flow (DCF) per share of $0.49 was
flat to the third quarter of 2022.
- Net income attributable to KMI of $532 million, compared to
$576 million in the third quarter of 2022.
- Distributable cash flow (DCF) of $1,094 million, compared to
$1,122 million in the third quarter of 2022.
- Adjusted Earnings of $562 million for the quarter, versus $575
million in the third quarter of 2022
KMI ended the quarter with a Net Debt-to-Adjusted EBITDA ratio
of 4.1, in line with its year-end goal.
“During the quarter the company experienced the second
management succession in its history, but our time-tested strategy
remains the same,” said Executive Chairman Richard D. Kinder.
“We return value to shareholders while maintaining a strong
balance sheet. We internally fund capital projects that produce
returns well in excess of our cost of capital — including
high-grade projects that are part of the ongoing energy evolution
toward a lower carbon future.
“We pay a healthy and growing dividend with robust coverage. Our
current dividend and stock price place the company in the top 5%
for yield in the S&P 500. We further returned value to
shareholders by continuing the opportunistic repurchasing of our
shares, totaling more than 28 million repurchased shares for
approximately $472 million so far this year,” Kinder concluded.
“This quarter KMI continued to benefit from strong demand for
our natural gas transportation and storage services,” said Chief
Executive Officer Kim Dang. “And the future is bright as we expect
natural gas demand to grow by more than 20% through 2028, led by
liquefied natural gas (LNG) exports, exports to Mexico and power
generation. Our network of interconnected assets is ideally located
to serve those export markets, and our 700 billion cubic feet (Bcf)
of operated natural gas storage capacity and nationwide pipeline
network is particularly useful in backstopping intermittent
renewable electricity resources.
“Our portfolio of assets performed very well during the quarter,
as financial contributions from the Natural Gas Pipeline business
segment, the Products Pipelines business segment and our Terminals
business segment were all up relative to the third quarter of
2022.
“Our growing project backlog includes capital-efficient
expansions of our existing natural gas pipeline and storage
systems. We continued working to add approximately 550 million
cubic feet per day (MMcf/d) of capacity to the Permian Highway
Pipeline (PHP) system. We also continued construction on an
expansion project at our Markham Storage facility along the Texas
Gulf Coast, where we will be adding more than 6 Bcf of incremental
working gas storage capacity,” Dang continued.
“EPS for the quarter was down slightly compared to the third
quarter of 2022 due to higher interest expense, while DCF per share
was flat to the third quarter of 2022. In addition to higher
interest expense, DCF was also impacted by higher sustaining
capital expenditures versus the prior year period. Both EPS and DCF
per share benefited from share repurchases.
“KMI’s balance sheet is strong, as we ended the third quarter
with a Net Debt-to-Adjusted EBITDA ratio of 4.1 times, in line with
our budget and well below our long-term target of approximately 4.5
times. This is especially noteworthy given that we executed
approximately $470 million in unbudgeted, opportunistic share
repurchases year to date,” continued Dang.
“Our project backlog at the end of the third quarter was $3.8
billion, up from $3.7 billion in the second quarter. In calculating
backlog Project EBITDA multiples, we exclude both the capital and
EBITDA from the CO2 business segment and our gathering and
processing projects, where the earnings are more uneven than with
our other business segments. To compensate for that we require
higher return thresholds for those projects. We expect the
remaining $2.7 billion of projects in the backlog to generate an
average Project EBITDA multiple of approximately 4.7 times.
“With continued strong emphasis on our base business, we are
also devoting roughly 84% of our project backlog to lower-carbon
energy investments, versus 80% in the second quarter, 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,” said Dang.
For the first nine months of 2023, the company reported net
income attributable to KMI of $1,797 million, compared to $1,878
million for the first nine months of 2022; and DCF of $3,544
million, down 6% from $3,753 million for the comparable period in
2022. Net income and DCF were impacted by higher interest expense
compared to the first nine months of 2022. DCF was further impacted
by higher sustaining capital expenditures versus the prior year
period.
2023 Outlook
For 2023, KMI budgeted net income attributable to KMI of $2.5
billion ($1.12 per share) and 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), 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.
We expect to finish 2023 slightly below our plan on a full-year
basis, due to lower than expected commodity prices, delayed RNG
projects and higher pipeline integrity expense. So far, crude oil
and natural gas prices have been below our full year 2023 budget
assumptions of $85 per barrel and $5.50 per MMBtu, respectively,
and our natural gas liquids (NGL) to crude ratio has been below the
CO2 segment’s budgeted ratio of 45%. We continue to see strong
performance in our overall business partially offsetting these
headwinds.
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 third quarter of 2023 relative to the
third quarter of 2022, primarily on higher contributions from our
Texas Intrastate system, Midcontinent Express Pipeline, and El Paso
Natural Gas (EPNG), partially offset by lower contributions from
our Eagle Ford gathering system assets,” said KMI President Tom
Martin.
Natural gas transport volumes were up 5% compared to the third
quarter of 2022, primarily from increases on EPNG due to returning
a pipeline to service and the retirement of a coal-fired power
plant, and across other assets due to higher volumes delivered to
power generation, LNG facilities and industrial customers. Natural
gas gathering volumes were up 11% from the third quarter of 2022
across most of our systems.
“Contributions from the Products Pipelines business
segment were up compared to the third quarter of 2022 due to
improved pricing and rate escalations. Total refined products
volumes were up slightly compared to the third quarter of 2022.
Crude and condensate volumes were also up 5%,” Martin said.
“Gasoline volumes were up 1% compared to the third quarter of 2022
while diesel volumes were down 2%. Jet fuel volumes continued to
rebound, up 5% versus the third quarter of 2022.
“Terminals business segment earnings were up compared to
the third quarter of 2022. Earnings contributions from our Jones
Act tanker business were meaningfully higher compared to the prior
year period on higher average charter rates. The fleet remains
fully contracted under term charter agreements. Contributions from
our liquids terminals were up versus the prior year period,
benefiting from higher utilization across the network, higher
volumes across our Houston Ship Channel hub and improving tank
lease rates at our Carteret, New Jersey facility,” continued
Martin. “Contributions from our bulk terminals were down modestly,
as growth projects and contractual rate escalations on petroleum
coke were more than offset by lower earnings from coal.
“CO2 business segment earnings were down compared to the
third quarter of 2022, primarily due to lower realized NGL and CO2
prices and volumes and higher power costs, partially offset by
contributions from the RNG business in our Energy Transition
Ventures group. Our realized weighted average NGL price for the
quarter was down 18% from the third quarter of 2022 at $30.74 per
barrel and our realized weighted average CO2 prices were down $0.21
or 13%,” said Martin. “NGL sales volumes net to KMI were down 8%
versus the third quarter of 2022. CO2 sales volumes were down 7% on
a net-to-KMI basis compared to the third quarter of 2022. Crude
volumes for the year are forecasted to be above plan, a remarkable
achievement given the impact of an extended outage at SACROC in the
first quarter.”
Other News
Corporate
- During the third quarter, KMI repurchased approximately 4
million shares for approximately $73 million at an average price of
$16.77 per share. Year-to-date through October 17, KMI has
repurchased approximately 28 million shares for approximately $472
million at an average price of $16.58 per share, leaving $1.6
billion in remaining authorized capacity for additional share
repurchases.
Natural Gas Pipelines
- Construction is nearly complete on the project 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
remains on track for an expected in-service date of December 2023.
PHP is jointly owned by subsidiaries of KMI, Kinetik Holdings Inc.
and Exxon Mobil Corporation. KMI is the operator of PHP.
- Construction continues on KMI’s Markham Storage Expansion
project that will expand the working gas storage capacity at our
Markham Storage facility (Markham) in Matagorda County along the
Texas Gulf Coast. The project involves adding an additional cavern
at Markham to provide more than 6 Bcf of incremental working gas
storage capacity and 650 MMcf/d of incremental withdrawal capacity
on KMI’s extensive Texas intrastate system. Shippers have
subscribed to most of the available capacity under long-term
agreements, and commercial in-service for the project is expected
in the first quarter of 2024.
- Construction is nearing completion on Kinder Morgan Tejas
Pipeline LLC’s (Tejas) project to expand its Eagle Ford natural gas
transportation system to deliver nearly 2 Bcf/d of Eagle Ford
production to Gulf Coast markets. As part of the approximately $237
million project, Tejas is constructing an approximately 67-mile,
42-inch pipeline from KMI’s existing Kinder Morgan Texas Pipeline
compressor station near Freer, Texas to the Tejas pipeline system
near Sinton, Texas. The project is expected to be in service in
November 2023.
- On September 8, 2023, Tennessee Gas Pipeline (TGP) and Southern
Natural Gas (SNG) received FERC authorization to commence
construction on phase 2 of the Evangeline Pass project, which will
enable the pipeline systems to jointly provide an additional 1.1
Bcf/d of natural gas transportation capacity to Venture Global’s
proposed Plaquemines LNG facility. Construction activities are also
ongoing for phase 1 of the project, which includes general
operational upgrades enabling TGP to provide approximately 900
MMcf/d of natural gas transportation capacity to Venture Global’s
facility. Upon completion, the two-phase $672 million project,
involving modifications and enhancements to portions of the TGP and
SNG systems in Mississippi and Louisiana, will result in the
delivery of the full project volumes to the facility. The expected
in-service dates for each phase will be aligned with Venture
Global’s in-service dates.
- Wyoming Interstate Company, LLC, has developed two egress
projects to access the growing supply from the Bakken formation.
The first project will add approximately 92 MMcf/d of Bakken export
transportation capacity from leases on Big Horn Gas Gathering and
Fort Union Gas Gathering (FUGG). The second project will add
approximately 300 MMcf/d of Bakken export transportation capacity
from leases on FUGG, Northern Border Pipeline Company and Bison
Pipeline. All of this capacity is backed by long-term commitments
from creditworthy shippers. The first project is expected to be in
service in the fourth quarter of 2023, while the second project is
scheduled to be in service in the first quarter of 2026.
- NGPL filed an application with FERC today for the construction
of its Texas Louisiana Expansion Project, which will increase the
pipeline system’s capacity by approximately 300 MMcf/d. The
approximately $118 million project (KMI’s share: approximately $44
million) involves new and upgraded facilities at two existing
compressor stations on the NGPL system to increase natural gas
deliveries from the growing Haynesville, Permian and Eagle Ford
supply basins to new and existing markets along NGPL’s Louisiana
Line in Texas and Louisiana. Pending the timely receipt of required
approvals, the target in-service date for the project is
anticipated to be mid-2026.
Terminals
- Long-lead materials have been ordered for KMI’s latest
expansion to the company’s industry-leading renewable diesel 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 construction
of multiple tanks totaling approximately 250,000 barrels of heated
storage capacity as well as various marine, rail and pipeline
infrastructure improvements. At the customer’s direction,
additional modal and product blending capabilities have been added
to the project scope, with a corresponding increase in fees. The
now approximately $54 million Geismar River Terminal project, which
is supported by a long-term commercial commitment, is expected to
be in service by the fourth quarter of 2024.
- Commissioning is complete on two vapor recovery units (VRU)
that are being installed as part of the previously announced VRU
project at KMI’s refined products terminal hub along the Houston
Ship Channel. Commissioning of the balance of the VRUs is expected
to be complete in the fourth quarter of 2023. The approximately $64
million investment addresses 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 represent a 38% reduction in total facility
greenhouse gas emissions versus 2019 (pre-pandemic) emissions.
- In the third quarter of 2023, KMI commissioned a new
30,000-barrel butane sphere at its Pasadena Terminal in Pasadena,
Texas, which connects to existing inbound pipeline supply sources
as well as the terminal’s in-plant butane distribution system. The
sphere provides an efficient, ratable means for KMI to meet storage
customers’ significant and growing butane demand for in-tank
gasoline blending. The approximately $25 million project was
completed on time and on budget.
Energy Transition Ventures
- The Liberty landfill RNG facility began commercial in-service
on October 3, 2023, while the Prairie View facility is expected to
begin commissioning in the fourth quarter of 2023. Together with
the completed Twin Bridges landfill RNG facility, these three
projects will add approximately 3.9 Bcf to KMI’s total annual RNG
capacity.
- KMI continues to make progress on the previously announced
conversion of the Autumn Hills, Michigan, landfill gas site to an
RNG facility. The site is expected to be placed in service in the
second quarter of 2024 with a capacity of 0.8 Bcf of RNG
annually.
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 5.4 Bcf
per year with an additional 1.5 Bcf in development. Our pipelines
transport natural gas, refined petroleum products, crude oil,
condensate, CO2, renewable fuels and other products, and our
terminals store and handle various commodities including gasoline,
diesel fuel, jet fuel, chemicals, metals, petroleum coke, and
ethanol and other renewable fuels and feedstocks. Learn more about
our work advancing energy solutions on the lower carbon initiatives
page at www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. ET on Wednesday,
October 18, at www.kindermorgan.com for a LIVE webcast conference
call on the company’s third 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, 4, 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
and nine months ended September 30, 2023 and 2022.
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(In millions)
Certain Items
Fair value amortization
$
—
$
(4
)
$
—
$
(11
)
Legal, environmental and other
reserves
—
23
—
23
Change in fair value of derivative
contracts (1)
37
(6
)
(93
)
49
Loss on impairment
—
—
67
—
Income tax Certain Items (2)
(7
)
(20
)
6
(35
)
Other
—
6
—
24
Total Certain Items (3)(4)
$
30
$
(1
)
$
(20
)
$
50
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)
Amounts for the periods ending September
30, 2023 and 2022 include the following amounts reported within
“Earnings from equity investments” on the accompanying Preliminary
Consolidated Statements of Income: (i) $1 million and $(1) million
for the three-month periods, respectively, and none and $4 million
for the nine-month periods, respectively, included within “Change
in fair value of derivative contracts” and (ii) $67 million for the
2023 nine-month period only 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)
Amounts for the periods ending September
30, 2023 and 2022 include, in aggregate, $3 million and $15 million
for the three-month periods, respectively, and $(10) million and
$(46) million for the nine-month periods, respectively, included
within “Interest, net” on the accompanying Preliminary Consolidated
Statements of Income which consist of (i) $(4) million for the 2022
three-month period and $(11) million for the 2022 nine-month period
of “Fair value amortization” and (ii) $3 million and $19 million
for the three-month periods, respectively, and $(10) million and
$(35) million for the nine-month periods, 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, investors, and other
external users to compare the performance of companies across our
industry. DCF per share serves as the primary financial performance
target for purposes of annual bonuses under our annual incentive
compensation program and for performance-based vesting of equity
compensation grants under our long-term incentive compensation
program. DCF should not be used as an alternative to net cash
provided by operating activities computed under GAAP. We believe
the GAAP measure most directly comparable to DCF is net income
attributable to Kinder Morgan, Inc. DCF per share is DCF divided by
average outstanding shares, including restricted stock awards that
participate in dividends. (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, general and administrative
expenses and corporate charges, interest expense, and income taxes
(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 September
30,
% change
Nine Months Ended September
30,
% change
2023
2022
2023
2022
Revenues
$
3,907
$
5,177
$
11,296
$
14,621
Operating costs, expenses and other
Costs of sales (exclusive of items shown
separately below)
1,405
2,717
3,591
7,294
Operations and maintenance
738
712
2,062
1,960
Depreciation, depletion and
amortization
561
551
1,683
1,632
General and administrative
162
162
497
470
Taxes, other than income taxes
106
113
319
340
Gain on divestitures and impairments,
net
(3
)
(9
)
(16
)
(30
)
Other income, net
—
—
(2
)
(6
)
Total operating costs, expenses and
other
2,969
4,246
8,134
11,660
Operating income
938
931
3,162
2,961
Other income (expense)
Earnings from equity investments
234
195
607
564
Amortization of excess cost of equity
investments
(18
)
(19
)
(54
)
(57
)
Interest, net
(457
)
(399
)
(1,345
)
(1,087
)
Other, net
3
21
7
63
Income before income taxes
700
729
2,377
2,444
Income tax expense
(145
)
(134
)
(509
)
(512
)
Net income
555
595
1,868
1,932
Net income attributable to NCI
(23
)
(19
)
(71
)
(54
)
Net income attributable to Kinder
Morgan, Inc.
$
532
$
576
$
1,797
$
1,878
Class P Shares
Basic and diluted earnings per share
$
0.24
$
0.25
(4
)%
$
0.80
$
0.83
(4
)%
Basic and diluted weighted average shares
outstanding
2,230
2,253
(1
)%
2,238
2,262
(1
)%
Declared dividends per share
$
0.2825
$
0.2775
2
%
$
0.8475
$
0.8325
2
%
Adjusted Earnings (1)
$
562
$
575
(2
)%
$
1,777
$
1,928
(8
)%
Adjusted Earnings per share (1)
$
0.25
$
0.25
—
%
$
0.79
$
0.85
(7
)%
Notes
(1)
Adjusted Earnings is Net income
attributable to Kinder Morgan, Inc. adjusted for Certain Items; 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 September
30,
% change
Nine Months Ended September
30,
% change
Preliminary Net Income Attributable to
Kinder Morgan, Inc. to Adjusted Earnings
2023
2022
2023
2022
Net income attributable to Kinder
Morgan, Inc.
$
532
$
576
(8
)%
$
1,797
$
1,878
(4
)%
Certain Items (1)
Fair value amortization
—
(4
)
—
(11
)
Legal, environmental and other
reserves
—
23
—
23
Change in fair value of derivative
contracts
37
(6
)
(93
)
49
Loss on impairment
—
—
67
—
Income tax Certain Items
(7
)
(20
)
6
(35
)
Other
—
6
—
24
Total Certain Items
30
(1
)
3,100
%
(20
)
50
(140
)%
Adjusted Earnings
$
562
$
575
(2
)%
$
1,777
$
1,928
(8
)%
Preliminary Net Income Attributable to
Kinder Morgan, Inc. to DCF
Net income attributable to Kinder
Morgan, Inc.
$
532
$
576
(8
)%
$
1,797
$
1,878
(4
)%
Total Certain Items (2)
30
(1
)
3,100
%
(20
)
50
(140
)%
DD&A
561
551
1,683
1,632
Amortization of excess cost of equity
investments
18
19
54
57
Income tax expense (3)
152
154
503
547
Cash taxes
(1
)
(3
)
(10
)
(12
)
Sustaining capital expenditures
(242
)
(207
)
(593
)
(498
)
Amounts from joint ventures
Unconsolidated JV DD&A
80
89
241
242
Remove consolidated JV partners'
DD&A
(16
)
(12
)
(47
)
(34
)
Unconsolidated JV income tax expense
(4)(5)
24
13
70
54
Unconsolidated JV cash taxes (4)
(21
)
(12
)
(73
)
(51
)
Unconsolidated JV sustaining capital
expenditures
(43
)
(38
)
(118
)
(89
)
Remove consolidated JV partners'
sustaining capital expenditures
2
2
6
6
Other items (6)
18
(9
)
51
(29
)
DCF
$
1,094
$
1,122
(2
)%
$
3,544
$
3,753
(6
)%
Weighted average shares outstanding for
dividends (7)
2,244
2,267
2,251
2,275
DCF per share
$
0.49
$
0.49
—
%
$
1.57
$
1.65
(5
)%
Declared dividends per share
$
0.2825
$
0.2775
$
0.8475
$
0.8325
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, adjustments for
income tax expense for the periods ended September 30, 2023 and
2022 exclude $(7) million and $(20) million for the three-month
periods, respectively, and $6 million and $(35) million for the
nine-month periods, 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 September
30,
% change
Nine Months Ended September
30,
% change
2023
2022
2023
2022
Net income attributable to Kinder
Morgan, Inc.
$
532
$
576
(8
)%
$
1,797
$
1,878
(4
)%
Certain Items (1)
Fair value amortization
—
(4
)
—
(11
)
Legal, environmental and other
reserves
—
23
—
23
Change in fair value of derivative
contracts
37
(6
)
(93
)
49
Loss on impairment
—
—
67
—
Income tax Certain Items
(7
)
(20
)
6
(35
)
Other
—
6
—
24
Total Certain Items
30
(1
)
(20
)
50
DD&A
561
551
1,683
1,632
Amortization of excess cost of equity
investments
18
19
54
57
Income tax expense (2)
152
154
503
547
Interest, net (3)
454
384
1,355
1,133
Amounts from joint ventures
Unconsolidated JV DD&A
80
89
241
242
Remove consolidated JV partners'
DD&A
(16
)
(12
)
(47
)
(34
)
Unconsolidated JV income tax expense
(4)
24
13
70
54
Adjusted EBITDA
$
1,835
$
1,773
3
%
$
5,636
$
5,559
1
%
Notes
(1)
See table included in “Non-GAAP Financial
Measures—Certain Items.”
(2)
To avoid duplication, adjustments for
income tax expense for the periods ended September 30, 2023 and
2022 exclude $(7) million and $(20) million for the three-month
periods, respectively, and $6 million and $(35) million for the
nine-month periods, respectively, which amounts are already
included within “Certain Items.” See table included in “Non-GAAP
Financial Measures—Certain Items.”
(3)
To avoid duplication, adjustments for
interest, net for the periods ended September 30, 2023 and 2022
exclude $3 million and $15 million for the three-month periods,
respectively, and $(10) million and $(46) million for the
nine-month periods, 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
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Segment EBDA (1)
Natural Gas Pipelines Segment EBDA
$
1,179
$
1,135
$
3,929
$
3,453
Certain Items (2)
Legal, environmental and other
reserves
—
23
—
23
Change in fair value of derivative
contracts
20
(5
)
(99
)
89
Other
—
6
—
24
Natural Gas Pipelines Adjusted Segment
EBDA
$
1,199
$
1,159
$
3,830
$
3,589
Products Pipelines Segment EBDA
$
311
$
257
$
780
$
855
Certain Items (2)
Change in fair value of derivative
contracts
2
—
3
—
Loss on impairment
—
—
67
—
Products Pipelines Adjusted Segment
EBDA
$
313
$
257
$
850
$
855
Terminals Segment EBDA
$
259
$
240
$
774
$
731
CO2 Segment EBDA
$
163
$
215
$
510
$
619
Certain Items (2)
Change in fair value of derivative
contracts
12
(20
)
13
(5
)
CO2 Adjusted Segment EBDA
$
175
$
195
$
523
$
614
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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Natural Gas Pipelines (1)
Transport volumes (BBtu/d)
40,201
38,274
39,884
38,349
Sales volumes (BBtu/d)
2,574
2,469
2,306
2,521
Gathering volumes (BBtu/d)
3,474
3,128
3,424
2,948
NGLs (MBbl/d)
35
24
34
29
Products Pipelines (MBbl/d)
Gasoline (2)
1,002
989
985
982
Diesel fuel
362
368
349
370
Jet fuel
292
278
285
262
Total refined product volumes
1,656
1,635
1,619
1,614
Crude and condensate
490
467
481
477
Total delivery volumes (MBbl/d)
2,146
2,102
2,100
2,091
Terminals (1)
Liquids leasable capacity (MMBbl)
78.7
78.2
78.7
78.2
Liquids leased capacity %
94.6
%
90.8
%
93.6
%
90.9
%
Bulk transload tonnage (MMtons)
12.6
13.4
39.7
40.0
CO2 (1)
SACROC oil production
19.59
19.91
20.10
19.62
Yates oil production
6.66
6.43
6.65
6.52
Other
2.52
3.10
2.80
3.21
Total oil production - net (MBbl/d)
(3)
28.77
29.44
29.55
29.35
NGL sales volumes - net (MBbl/d) (3)
8.98
9.74
8.79
9.47
CO2 sales volumes - net (Bcf/d)
0.311
0.335
0.338
0.352
Realized weighted average oil price ($ per
Bbl)
$
67.60
$
66.34
$
67.49
$
67.91
Realized weighted average NGL price ($ per
Bbl)
$
30.74
$
37.68
$
31.87
$
41.01
CO2 Segment Hedges
Remaining 2023
2024
2025
2026
2027
Crude Oil (4)
Price ($ per Bbl)
$
65.66
$
65.04
$
63.19
$
65.16
$
64.14
Volume (MBbl/d)
26.90
20.40
11.45
8.60
2.60
NGLs
Price ($ per Bbl)
$
49.95
$
53.72
Volume (MBbl/d)
5.11
2.68
Notes
(1)
Volumes for acquired assets are included
for all periods, however, EBDA contributions from acquisitions are
included only for periods subsequent to their acquisition. Volumes
for assets 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)
September 30,
December 31,
2023
2022
Assets
Cash and cash equivalents
$
80
$
745
Other current assets
2,353
3,058
Property, plant and equipment, net
35,944
35,599
Investments
7,674
7,653
Goodwill
19,965
19,965
Deferred charges and other assets
2,846
3,058
Total assets
$
68,862
$
70,078
Liabilities and Stockholders'
Equity
Short-term debt
$
3,130
$
3,385
Other current liabilities
3,121
3,545
Long-term debt
27,863
28,288
Debt fair value adjustments
8
115
Other
3,159
2,631
Total liabilities
37,281
37,964
Other stockholders' equity
30,676
31,144
Accumulated other comprehensive loss
(418
)
(402
)
Total KMI stockholders' equity
30,258
30,742
Noncontrolling interests
1,323
1,372
Total stockholders' equity
31,581
32,114
Total liabilities and stockholders'
equity
$
68,862
$
70,078
Net Debt (1)
$
30,927
$
30,936
Adjusted EBITDA Twelve Months
Ended (2)
Reconciliation of Net Income
Attributable to Kinder Morgan, Inc. to Last Twelve Months Adjusted
EBITDA
September 30,
December 31,
2023
2022
Net income attributable to Kinder
Morgan, Inc.
$
2,466
$
2,548
Total Certain Items (3)
18
88
DD&A
2,237
2,186
Amortization of excess cost of equity
investments
72
75
Income tax expense (4)
703
747
Interest, net (4)
1,746
1,524
Amounts from joint ventures
Unconsolidated JV DD&A
322
323
Less: Consolidated JV partners'
DD&A
(62
)
(50
)
Unconsolidated JV income tax expense
91
75
Adjusted EBITDA
$
7,593
$
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
$(14) million and $(8) million as of September 30, 2023 and
December 31, 2022, respectively, as we have entered into swaps to
convert that debt to U.S.$.
(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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
KMI FCF
Net income attributable to Kinder Morgan,
Inc.
$
532
$
576
$
1,797
$
1,878
Net income attributable to noncontrolling
interests
23
19
71
54
DD&A
561
551
1,683
1,632
Amortization of excess cost of equity
investments
18
19
54
57
Deferred income taxes
141
130
495
499
Earnings from equity investments
(234
)
(195
)
(607
)
(564
)
Distribution of equity investment earnings
(1)
205
200
572
548
Working capital and other items (2)
40
(385
)
104
(541
)
Cash flow from operations
1,286
915
4,169
3,563
Capital expenditures (GAAP)
(647
)
(365
)
(1,689
)
(1,144
)
FCF
639
550
2,480
2,419
Dividends paid
(634
)
(629
)
(1,898
)
(1,876
)
FCF after dividends
$
5
$
(79
)
$
582
$
543
Notes
(1)
Periods ended September 30, 2023 and 2022
exclude distributions from equity investments in excess of
cumulative earnings of $48 million and $22 million for the
three-month periods, respectively, and $166 million and $126
million for the nine-month periods, 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/20231018790312/en/
Dave Conover Media Relations Newsroom@kindermorgan.com
Investor Relations (800) 348-7320 km_ir@kindermorgan.com
Kinder Morgan (NYSE:KMI)
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