Major Permian Projects Advance; Substantial Growth Compared to
Previous Period
Kinder Morgan, Inc. (NYSE: KMI) today announced that its board of
directors approved a cash dividend of $0.25 per share for the first
quarter ($1.00 annualized) payable on May 15, 2019, to common
stockholders of record as of the close of business on April 30, 2019.
This is a 25 percent increase over the fourth quarter 2018 dividend. KMI
is reporting first quarter net income available to common stockholders
of $556 million, compared to $485 million in the first quarter of 2018;
and distributable cash flow (DCF) of $1,371 million, a 10 percent
increase over the first quarter of 2018. In the first quarter of 2019,
KMI continued to fund most of its growth capital through operating cash
flows with no need to access capital markets for that purpose. During
the first quarter KMI also paid down $1.3 billion of maturing bond debt
with cash from the return of capital distribution from the Trans
Mountain sale.
“We are pleased to continue the dividend growth plan that we outlined to
shareholders during the summer of 2017,” said Richard D. Kinder,
Executive Chairman. “We continue to maintain a strong balance sheet and
have been upgraded by two of the three ratings agencies. We are well
positioned for a successful 2019 and remain on positive outlook for an
upgrade by Fitch later in the year.”
“Contributions from our Natural Gas Pipelines segment were up
substantially compared to the first quarter of 2018,” Chief Executive
Officer Steve Kean noted. “We continued to make progress on two projects
critical to the development of resources in the Permian Basin: the Gulf
Coast Express and Permian Highway Pipeline projects, as well as our Elba
Liquefaction facility,” continued Kean. “On the regulatory front, we
were very pleased to achieve settlements with our shippers on both
Tennessee Gas Pipeline (TGP) and El Paso Natural Gas (EPNG) that address
the Federal Energy Regulatory Commission’s (FERC’s) 501-G process. These
two agreements, pending FERC approval, should resolve the vast majority
of KMI’s 501-G exposure.”
KMI President Kim Dang said, “The first quarter of 2019 showed that we
continue to benefit from strategically located, fee-based assets that
generate predictable cash flows from a network that provides our
customers with unmatched flexibility. Our commercial and operating
performance continues to be very good, and we generated first quarter
earnings per common share of $0.24, compared to $0.22 per common share
in the first quarter of 2018, and DCF of $0.60 per common share,
representing 7 percent growth over the first quarter of 2018. This
resulted in more than $800 million of excess DCF above our declared
dividend.”
As noted above, KMI reported first quarter net income available to
common stockholders of $556 million, compared to $485 million for the
first quarter of 2018, and DCF of $1,371 million, up 10 percent from
$1,247 million for the comparable period in 2018. These increases were
due to greater contributions from the Natural Gas Pipelines segment, and
lower preferred equity dividend payments, partially offset by the
elimination of Kinder Morgan Canada earnings following the Trans
Mountain sale and reduced contributions from our CO2 segment.
KMI’s project backlog for the first quarter stood at $6.1 billion,
approximately $400 million more than the fourth quarter of 2018, with
additions of approximately $600 million in new projects, primarily in
the Natural Gas Pipelines segment, offset by approximately $200 million
in projects placed in service and other project capital adjustments.
Excluding the CO2 segment projects, KMI expects projects in
the backlog to generate an average Project EBITDA multiple of
approximately 5.5 times.
2019 Outlook
For 2019, KMI’s budget contemplates declared dividends of $1.00 per
common share, DCF of approximately $5.0 billion ($2.20 per common share)
and Adjusted EBITDA of approximately $7.8 billion. Adjusted EBITDA is
likely to be slightly below budget while DCF is expected to be on budget
as lower interest expense offsets the slightly lower Adjusted EBITDA.
KMI budgeted to invest $3.1 billion in growth projects and contributions
to joint ventures during 2019. KMI expects to use internally generated
cash flow to fully fund its 2019 dividend payments as well as the vast
majority of its 2019 discretionary spending, without the need to access
equity markets. Due to the Adjusted EBITDA impact discussed above, KMI
now expects to end 2019 with a Net Debt-to-Adjusted EBITDA ratio of
approximately 4.6 times, but still consistent with its long-term target
of approximately 4.5 times.
KMI does not provide budgeted net income attributable to common
stockholders (the GAAP financial measure most directly comparable to DCF
and Adjusted EBITDA) or budgeted project net income (the GAAP financial
measure most directly comparable to Project EBITDA) due to the
impracticality of predicting certain amounts required by GAAP, such as
unrealized gains and losses on derivatives marked to market, and
potential changes in estimates for certain contingent liabilities.
KMI’s budgeted expectations assume average annual prices for West Texas
Intermediate (WTI) crude oil of $60.00 per barrel and Henry Hub natural
gas of $3.15 per million British Thermal Units (MMBtu), consistent with
forward pricing during the company’s budget process. The vast majority
of revenue KMI generates is fee-based and therefore not directly exposed
to commodity prices. For 2019, we estimate that every $1 per barrel
change in the average WTI crude oil price impacts DCF by approximately
$9 million and each $0.10 per MMBtu change in the price of natural gas
impacts DCF by approximately $1 million. The primary area where KMI has
commodity price sensitivity is in its CO2 segment, with the
majority of the segment’s next 12 months of oil and NGL production
hedged to minimize this sensitivity. The segment is currently hedged for
35,581 barrels per day (Bbl/d) at $55.59/Bbl in 2019; 18,223 Bbl/d at
$56.35/Bbl in 2020; 9,400 Bbl/d at $55.06/Bbl in 2021; 3,700 Bbl/d at
$56.77/Bbl in 2022, and 300 Bbl/d at $54.73/Bbl in 2023.
Overview of Business Segments
“The Natural Gas Pipelines segment had another strong quarter.
The segment’s financial performance for the first quarter of 2019 was
significantly higher relative to the first quarter of 2018,” said Dang.
“The transmission assets saw higher revenue on TGP due to contributions
from projects placed into service in 2018, from EPNG due primarily to
increased Permian-related activity, and on Kinder Morgan Louisiana
Pipeline (KMLP) due to the Sabine Pass Expansion that went into service
in December 2018. The segment also benefited from continued growth on
its gathering and processing assets in Louisiana and Texas due to
increased drilling and production in the Haynesville and Eagle Ford
basins, respectively.”
Natural gas transport volumes were up 4.5 Bcf/d or 14 percent compared
to the first quarter of 2018. This constitutes the fifth quarter in a
row in which volumes exceeded the previous comparable prior year period
by 10 percent or more. Much of the increase in the first quarter of 2019
was primarily driven by increased production in the DJ and Permian
basins that benefited EPNG, Wyoming Interstate Company, and Colorado
Interstate Gas Pipeline Company; as well as new projects placed into
service on TGP and KMLP. Natural gas gathering volumes were up 21
percent from the first quarter of 2018 due primarily to higher volumes
on the KinderHawk and South Texas Midstream systems. NGL volumes, which
are now being reported in the Natural Gas segment due to an internal
reporting reorganization, were up 4 percent compared to the first
quarter of 2018.
Natural gas is critical to the American economy and to meeting the
world’s evolving energy needs. Objective analysts project U.S. natural
gas demand, including net exports of liquefied natural gas (LNG) and
exports to Mexico, will increase from 2018 levels by 32 percent to
nearly 119 Bcf/d by 2030. Of the natural gas consumed in the U.S., about
40 percent moves on KMI pipelines, and roughly the same percentage holds
true for U.S. natural gas exports. Analysts project that future natural
gas infrastructure opportunities through 2030 will be driven by greater
demand for gas-fired power generation across the country (forecast to
increase by 15 percent), net LNG exports (forecast to increase almost
five-fold), exports to Mexico (forecast to rise by 39 percent), and
continued industrial development, particularly in the petrochemical
industry.
“The Products Pipelines segment earnings were down slightly
compared with the first quarter of 2018 as strong performances by
CalNev, Plantation, KMST, and Bakken Crude were offset by reduced
contributions from Kinder Morgan Crude & Condensate (KMCC) and SFPP,”
Dang said.
Crude and condensate pipeline volumes were up 8 percent compared to the
first quarter of 2018, though lower re-contracted rates reduced earnings
contributions. Total refined products volumes were flat versus the same
period in 2018.
“Terminals segment earnings were up modestly compared to the
first quarter of 2018. Contributions from our liquids business, which
accounts for nearly 80 percent of the segment’s total earnings, were up
almost 1 percent due to strength in key hubs along the Houston Ship
Channel and in Edmonton, Alberta, including the impact of our new Base
Line Terminal joint venture,” said Dang. “These gains were partially
offset by tank lease costs at KML’s Edmonton South Terminal, paid
pursuant to the lease arrangement with Trans Mountain that was extended
for a 20-year term and became a third-party arrangement due to the Trans
Mountain Sale.”
Dang continued, “Contributions from our bulk business were roughly flat
compared to the first quarter of 2018.”
“CO2 segment earnings were down 20 percent
versus the first quarter of 2018, primarily on lower NGL and crude oil
prices, as well as slightly lower crude oil volumes. Our realized
weighted average crude oil price for the quarter was down 19 percent at
$48.67 per barrel compared to $59.72 per barrel for the first quarter of
2018, largely driven by our Midland/Cushing basis hedges. Our weighted
average NGL price for the quarter was down $4.41 per barrel, or 15
percent from the first quarter of 2018,” said Dang. “First quarter 2019
combined oil production across all of our fields was down 3 percent
compared to the same period in 2018 on a net to KMI basis, with a 25
percent increase in Tall Cotton volumes offset by declines at our other
assets. CO2 volumes were up 5 percent on a net to KMI basis
compared to the first quarter of 2018. McElmo Dome achieved record
production in the quarter, while Doe Canyon experienced lower production
compared to the previous comparable period. First quarter 2019 net NGL
sales volumes of 10.1 thousand barrels per day (MBbl/d) were down 1
percent compared to the same period in 2018.”
Other News
Corporate
-
On February 1, 2019, KMI used its share of the January 3, 2019 return
of capital distribution from the Trans Mountain sale to pay down $1.3
billion of maturing bond debt.
-
KMI, as holder of an approximately 70 percent majority voting interest
in Kinder Morgan Canada Limited (TSX: KML), notes that following the
Trans Mountain sale, and given that the original purpose of KML as a
funding vehicle for the Trans Mountain expansion no longer exists, KML
announced that it would undertake a strategic review of KML to
determine a course of action that maximizes value to all KML
shareholders. The options being evaluated include, among others,
continuing to operate as a standalone enterprise, a disposition by
sale, and a strategic combination with another company. This process
involves a rigorous analysis of a variety of potential alternatives,
and, while the complexity of the situation is requiring more time than
originally anticipated, the process is near its conclusion. KML
expects to complete the review and announce the outcome in the coming
weeks.
Natural Gas Pipelines
-
Progress continues on the Permian Highway Pipeline Project (PHP
Project). The civil and environmental surveys are substantially
complete, and the land acquisition process is underway. In November
2018, the project partners approved an expansion of the PHP Project
capacity by approximately 0.1 Bcf/d, which is currently being
marketed. The approximately $2 billion PHP Project is now designed to
transport up to 2.1 Bcf/d of natural gas through approximately 430
miles of 42-inch pipeline from the Waha, Texas area to the U.S. Gulf
Coast and Mexico markets and is expected to be in service in October
2020, pending regulatory approvals. The original 2.0 Bcf/d of capacity
is fully subscribed under long term binding agreements. Kinder Morgan
Texas Pipeline’s (KMTP) and EagleClaw Midstream each have a 40 percent
ownership interest, and an affiliate of an anchor shipper has a 20
percent interest. Altus Midstream (a gas gathering, processing and
transportation company formed by shipper Apache Corporation) has an
option to acquire an equity interest in the project that expires in
September 2019. If Altus exercises its option, KMI, EagleClaw and
Altus will each hold a 26.67 percent ownership interest in the
project. KMTP will build and operate the pipeline.
-
Construction continues on the Gulf Coast Express Pipeline Project (GCX
Project). The remaining 40 miles of the 36-inch Midland lateral was
placed in service at the beginning of April 2019. Construction is
progressing well on the 42-inch mainline and compressor stations
associated with the project, which remains on schedule for a full
in-service date of October 2019. The approximately $1.75 billion
project is designed to transport about 2.0 Bcf/d of natural gas from
the Permian Basin to the Agua Dulce, Texas area, and is fully
subscribed under long-term, binding agreements. KMTP owns a 35 percent
interest in the Project and is building and will operate the pipeline.
Other equity holders include Altus Midstream, DCP Midstream and an
affiliate of Targa Resources.
-
The first of ten liquefaction units of the nearly $2 billion Elba
Liquefaction Project is expected to be placed in service by
approximately May 1, 2019. The remaining nine units are expected to be
placed in service sequentially, one per month thereafter. The
federally approved project at the existing Southern LNG Company
facility at Elba Island near Savannah, Georgia, will have a total
liquefaction capacity of approximately 2.5 million tonnes per year of
LNG, equivalent to approximately 350 million cubic feet per day of
natural gas. The project is supported by a 20-year contract with
Shell. Elba Liquefaction Company, L.L.C., a KMI joint venture with EIG
Global Energy Partners as a 49 percent partner, will own the
liquefaction units and other ancillary equipment. Certain other
facilities associated with the project are 100 percent owned by KMI.
-
NGPL is proceeding with a second Gulf Coast southbound expansion
project and made its FERC filing on February 28, 2019. The
approximately $230 million project (KMI’s share: $115 million) will
increase southbound capacity on NGPL’s Gulf Coast System by
approximately 300,000 Dth/d to serve Corpus Christi Liquefaction, LLC.
The project is supported by a long-term take-or-pay contract and is
expected to be placed into service in the first half of 2021 pending
appropriate regulatory approvals.
-
KMI is investing more than $500 million towards its gas gathering and
processing footprint in the Williston Basin. Approximately 275 MMCF/d
of gathering capacity is being created through pipeline and
compression additions. Construction is also underway on a new 150
MMCF/d cryogenic plant in McKenzie County, North Dakota, with an
estimated in-service date of November 1, 2019.
-
In July 2018, the FERC issued an order requiring an informational
filing by interstate natural gas pipelines on a new Form 501-G,
evaluating the impact of the 2017 Tax Reform and the Revised Tax
Policy on tax allowances for the pipelines. In the fourth quarter of
2018, KMI filed Form 501-G for 19 of its FERC-regulated assets. The
FERC granted SNG a waiver from filing the 501-G based on its
previously filed negotiated settlement and TGP was granted an
extension from filing based on ongoing negotiations with customers.
-
On April 8, 2019, KMI announced that TGP and EPNG agreed to
settlements with their shippers to address FERC’s 501-G process. KMI
successfully worked with its shippers without the need for litigation
or any additional intervention by the FERC. Rate adjustments set forth
in the agreements by TGP and EPNG will have a combined approximately
$50 million Adjusted EBITDA impact for 2019; and when fully
implemented, will have an approximately $100 million combined annual
impact on Adjusted EBITDA.
-
FERC has approved a settlement that Young Gas Storage reached with its
customers and has terminated all but three of the remaining 501-G
proceedings without taking further action. FERC initiated a rate
investigation of Bear Creek Storage Company. Bear Creek Storage
Company filed a cost and revenue study in compliance with the FERC
investigation on April 1, 2019. Two other KMI 501-G filings remain
pending but relate to systems under rate moratoria.
-
KMI expects the vast majority of KMI's 501-G exposure to be resolved
upon FERC’s approval of the EPNG and TGP settlements discussed above.
Products Pipelines
-
On April 11, 2019, FERC approved the Petition for Declaratory Order
regarding the regulatory framework and commercial terms for the
Roanoke Expansion project on the Plantation Pipe Line system. The
project is on track for interim capacity of 21,000 barrels per day
(bpd) to be available on the Collins to Greensboro segment by May 1,
2019. Service from the Baton Rouge to Collins segment is expected to
be available starting September 1, 2019. This project will provide
approximately 21,000 bpd of incremental refined petroleum products
capacity on the Plantation Pipe Line system from the Baton Rouge,
Louisiana and Collins, Mississippi origin points to the Roanoke,
Virginia area, and consists primarily of additional pump capacity and
operational storage. The full project from Baton Rouge to Roanoke is
expected to be in service by April 1, 2020.
-
In January 2019, Kinder Morgan and Tallgrass Energy, LP (TGE)
announced an agreement to jointly develop a solution to increase
existing crude oil takeaway capacity in the growing Powder River and
Denver-Julesburg basins, as well as to add incremental takeaway
capacity to the Williston Basin and portions of Western Canada. The
proposed venture would include both existing and newly constructed
assets. TGE would contribute its Pony Express Pipeline System. KMI
would contribute portions of its Wyoming Intrastate Company and
Cheyenne Plains Gas Pipeline and begin the process of their
abandonment and conversion to crude oil service. In addition,
approximately 200 miles of new pipeline would be constructed to
provide crude oil deliveries into Cushing, Oklahoma.
-
In February 2019, Kinder Morgan and Phillips 66 announced a joint open
season through April 30, 2019 by Gray Oak Pipeline, LLC (Gray Oak) and
KMCC to provide shippers with long-term crude oil transportation from
Gray Oak Pipeline origin points in the Permian Basin to KMCC delivery
points at or near the Houston Ship Channel under a binding joint
transportation services agreement. Delivery from the Gray Oak Pipeline
to the Houston Ship Channel would be achieved through a connection in
South Texas.
Terminals
-
Kinder Morgan has authorized an expansion of its market-leading Argo
ethanol hub. The project scope, which spans both the Argo and Chicago
Liquids facilities, includes 105,000 barrels of additional ethanol
storage capacity and enhancements to the system’s rail loading, rail
unloading and barge loading capabilities. The approximately $20
million project will improve the system’s inbound and outbound modal
balances adding greater product-clearing efficiencies to this
industry-critical pricing and liquidity hub.
-
All material permits have been secured and construction activities
will commence shortly on the distillate storage expansion project at
KML’s Vancouver Wharves terminal in North Vancouver, British Columbia.
The C$43 million capital project, which calls for the construction of
two new distillate tanks with combined storage capacity of 200,000
barrels and enhancements to the railcar unloading capabilities, is
supported by a 20-year initial term, take-or-pay contract with an
affiliate of a large, international integrated energy company. The
project is expected to be placed in service late first quarter of 2021.
CO2
-
The SACROC field continues to exceed expectations, surpassing KMI’s
production budget for the first quarter. This continued production is
due to KMI’s on-going success in exploiting the transition zone, which
holds an estimated incremental 700 million barrels of original oil in
place.
-
CO2 demand in the Permian Basin supported record production
from the McElmo Dome field of 1.209 Bcf/d for the first quarter of
2019.
-
Oil production in the first quarter at KMI’s Tall Cotton facility grew
by 25 percent relative to the same period in 2018 (though below plan)
following the completion of the second phase of its field project.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy
infrastructure companies in North America. We own an interest in or
operate approximately 84,000 miles of pipelines and 157 terminals. Our
pipelines transport natural gas, refined petroleum products, crude oil,
condensate, CO2 and other products, and our terminals
transload and store liquid commodities including petroleum products,
ethanol and chemicals, and bulk products, including petroleum coke,
metals and ores. For more information please visit www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. Eastern Time on
Wednesday, April 17, at www.kindermorgan.com
for a LIVE webcast conference call on the company’s first quarter
earnings. A printer-friendly copy of this earnings release is
available under the “Earnings Releases” tab in the “Annual and Quarterly
Reports” section of our investor website, which can be accessed via the
following link: https://ir.kindermorgan.com/annual-quarterly-reports.
Non-GAAP Financial Measures
The non-generally accepted accounting principles (non-GAAP) financial
measures of distributable cash flow (DCF), both in the aggregate and per
share, segment earnings before depreciation, depletion, amortization and
amortization of excess cost of equity investments (DD&A) and Certain
Items (Segment EBDA before Certain Items), net income before interest
expense, taxes, DD&A and Certain Items (Adjusted EBITDA), Adjusted
Earnings and Adjusted Earnings per common share are presented herein.
Certain Items as used to
calculate our Non-GAAP measures, are items that are required by GAAP to
be reflected in net income, but typically either (1) do not have a cash
impact (for example, asset impairments), or (2) by their nature are
separately identifiable from our normal business operations and in our
view are likely to occur only sporadically (for example certain legal
settlements, enactment of new tax legislation and casualty losses).
DCF is calculated by adjusting
net income available to common stockholders before Certain Items for
DD&A, total book and cash taxes, sustaining capital expenditures and
other items. DCF is a significant performance measure useful to
management and by external users of our financial statements in
evaluating our performance and to measure and estimate the ability of
our assets to generate cash earnings after servicing our debt and
preferred stock dividends, paying cash taxes and expending sustaining
capital, that could be used for discretionary purposes such as common
stock dividends, stock repurchases, retirement of debt, or expansion
capital expenditures. We believe the GAAP measure most directly
comparable to DCF is net income available to common stockholders. A
reconciliation of net income available to common stockholders to DCF is
provided herein. DCF per share is DCF divided by average
outstanding shares, including restricted stock awards that participate
in dividends.
Segment EBDA before Certain Items
is used by management in its analysis of segment performance and
management of our business. General and administrative expenses
are generally not under the control of our segment operating managers,
and therefore, are not included when we measure business segment
operating performance. We believe Segment EBDA before Certain
Items is a significant performance metric because it provides us and
external users of our financial statements additional insight into the
ability of our segments to generate segment cash earnings on an ongoing
basis. We believe it is useful to investors because it is a
measure that management uses to allocate resources to our segments and
assess each segment’s performance. We believe the GAAP measure
most directly comparable to Segment EBDA before Certain Items is segment
earnings before DD&A and amortization of excess cost of equity
investments (Segment EBDA). Segment EBDA before Certain Items is
calculated by adjusting Segment EBDA for the Certain Items attributable
to a segment, which are specifically identified in the footnotes to the
accompanying tables.
Adjusted EBITDA is calculated by
adjusting net income before interest expense, taxes, and DD&A (EBITDA)
for Certain Items, net income attributable to noncontrolling interests
further adjusted for KML noncontrolling interests, and KMI’s share of
certain equity investees’ DD&A (net of consolidating joint venture
partners’ share of DD&A) and book taxes, which are specifically
identified in the footnotes to the accompanying tables. Adjusted
EBITDA is used by management and external users, in conjunction with our
net debt, to evaluate certain leverage metrics. Therefore, we
believe Adjusted EBITDA is useful to investors. We believe the
GAAP measure most directly comparable to Adjusted EBITDA is net income.
Adjusted Earnings is net income
available to common stockholders before Certain Items. Adjusted
Earnings is used by certain external users of our financial statements
to assess the earnings of our business excluding Certain Items as
another reflection of the company’s ability to generate earnings. We
believe the GAAP measure most directly comparable to Adjusted Earnings
is net income available to common stockholders. Adjusted Earnings per
share uses Adjusted Earnings and applies the same two-class method used
in arriving at Basic Earnings Per Common Share.
Net Debt and Adjusted
Net Debt, as used in this news release, are non-GAAP financial
measures that management believes are useful to investors and other
users of our financial information in evaluating our leverage. Net Debt
is calculated by subtracting from debt (i) cash and cash equivalents,
(ii) the preferred interest in the general partner of Kinder Morgan
Energy Partners L.P., (iii) debt fair value adjustments, (iv) the
foreign exchange impact on Euro-denominated bonds for which we have
entered into currency swaps and (v) 50% of the outstanding KML preferred
equity. Adjusted Net Debt is Net Debt with the cash component as
of December 31, 2018, reduced by the amount of cash distributed to KML’s
restricted voting shareholders as a return of capital on January 3,
2019, and increased by the net of the gain realized on settlement of net
investment hedges of our foreign current risk with respect to our share
of the KML return of capital on January 3, 2019. We believe the
most comparable measure to Net Debt and Adjusted Net Debt is debt net of
cash and cash equivalents as reconciled in the notes to the accompanying
Preliminary Consolidated Balance Sheets page.
Project EBITDA, as used in this
news release, 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 joint
venture projects, our percentage share of the foregoing. Management uses
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 project net income.
Our non-GAAP measures described above should not be considered
alternatives to GAAP net income or other GAAP measures and have
important limitations as analytical tools. Our computations of
DCF, Segment EBDA before Certain Items and Adjusted EBITDA may differ
from similarly titled measures used by others. You should not
consider these non-GAAP measures in isolation or as substitutes for an
analysis of our results as reported under GAAP. DCF should not be
used as an alternative to net cash provided by operating activities
computed under GAAP. Management compensates for the limitations
of these non-GAAP measures by reviewing our comparable GAAP measures,
understanding the differences between the measures and taking this
information into account in its analysis and its decision-making
processes.
Important Information Relating to
Forward-Looking Statements
This news release includes forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995 and
Section 21E of the Securities and Exchange Act of 1934. Generally the
words “expects,” “believes,” anticipates,” “plans,” “will,” “shall,”
“estimates,” and similar expressions identify forward-looking
statements, which are generally not historical in nature. Forward-looking
statements are subject to risks and uncertainties and are based on the
beliefs and assumptions of management, based on information currently
available to them. Although KMI believes that these
forward-looking statements are based on reasonable assumptions, it can
give no assurance 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 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, 2018 (under the headings “Risk Factors” and “Information
Regarding Forward-Looking Statements” and elsewhere) and its subsequent
reports, which are available through the SEC’s EDGAR system at www.sec.gov
and on our website at ir.kindermorgan.com.
Forward-looking statements speak only as of the date they were made,
and except to the extent required by law, KMI undertakes no obligation
to update any forward-looking statement because of new information,
future events or other factors. Because of these risks and
uncertainties, readers should not place undue reliance on these
forward-looking statements.
|
|
|
|
|
|
|
|
|
|
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Statements of Income
(Unaudited)
(In millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
3,429
|
|
|
|
$
|
3,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs, expenses and other
|
|
|
|
|
|
|
|
|
|
Costs of sales
|
|
|
|
948
|
|
|
|
|
1,019
|
|
|
|
|
Operations and maintenance
|
|
|
|
598
|
|
|
|
|
619
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
|
593
|
|
|
|
|
570
|
|
|
|
|
General and administrative
|
|
|
|
154
|
|
|
|
|
173
|
|
|
|
|
Taxes, other than income taxes
|
|
|
|
118
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
2,411
|
|
|
|
|
2,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
1,018
|
|
|
|
|
949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
Earnings from equity investments
|
|
|
|
192
|
|
|
|
|
220
|
|
|
|
|
Amortization of excess cost of equity investments
|
|
|
|
(21
|
)
|
|
|
|
(32
|
)
|
|
|
|
Interest, net
|
|
|
|
(460
|
)
|
|
|
|
(467
|
)
|
|
|
|
Other, net
|
|
|
|
10
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
739
|
|
|
|
|
706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
|
(172
|
)
|
|
|
|
(164
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
567
|
|
|
|
|
542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests
|
|
|
|
(11
|
)
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Kinder Morgan, Inc.
|
|
|
|
556
|
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
|
—
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
|
$
|
556
|
|
|
|
$
|
485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class P Shares
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share
|
|
|
$
|
0.24
|
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares outstanding
|
|
|
|
2,262
|
|
|
|
|
2,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declared dividend per common share
|
|
|
$
|
0.25
|
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per common share (1)
|
|
|
$
|
0.25
|
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBDA (2)
|
|
|
|
|
|
|
|
|
% change
|
Natural Gas Pipelines
|
|
|
$
|
1,203
|
|
|
|
$
|
1,128
|
|
|
|
7
|
%
|
Products Pipelines
|
|
|
|
276
|
|
|
|
|
266
|
|
|
|
4
|
%
|
Terminals
|
|
|
|
299
|
|
|
|
|
296
|
|
|
|
1
|
%
|
CO2
|
|
|
|
198
|
|
|
|
|
199
|
|
|
|
(1
|
)%
|
Kinder Morgan Canada
|
|
|
|
(2
|
)
|
|
|
|
46
|
|
|
|
(104
|
)%
|
Total Segment EBDA
|
|
|
$
|
1,974
|
|
|
|
$
|
1,935
|
|
|
|
2
|
%
|
|
Notes
|
(1)
|
|
Adjusted earnings per common share uses adjusted earnings and
applies the same two-class method used in arriving at diluted
earnings per common share. See the following page, Preliminary
Earnings Contribution by Business Segment, for a reconciliation of
net income available to common stockholders to adjusted earnings.
|
(2)
|
|
For segment reporting purposes, effective January 1, 2019, certain
assets were transferred between our business segments. As a result,
three months ended March 31, 2018 amounts have been reclassified to
conform to the current presentation, which (decreased) increased
Segment EBDA for the following individual business segments: Natural
Gas Pipelines $(8) million, Products Pipelines $7 million, and
Terminals $1 million.
|
|
|
|
|
|
|
|
|
|
|
Kinder Morgan, Inc. and Subsidiaries
Preliminary Earnings Contribution by Business Segment
(Unaudited)
(In millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
% change
|
Segment EBDA before certain items (1)
|
|
|
|
|
|
|
|
|
|
Natural Gas Pipelines
|
|
|
$
|
1,201
|
|
|
|
$
|
1,074
|
|
|
|
12
|
%
|
Products Pipelines
|
|
|
293
|
|
|
|
297
|
|
|
|
(1
|
)%
|
Terminals
|
|
|
299
|
|
|
|
297
|
|
|
|
1
|
%
|
CO2
|
|
|
189
|
|
|
|
237
|
|
|
|
(20
|
)%
|
Kinder Morgan Canada
|
|
|
—
|
|
|
|
46
|
|
|
|
(100
|
)%
|
Subtotal
|
|
|
1,982
|
|
|
|
1,951
|
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
DD&A and amortization of excess cost of equity investments
|
|
|
(614
|
)
|
|
|
(602
|
)
|
|
|
|
General and administrative and corporate charges (1) (2)
|
|
|
(158
|
)
|
|
|
(164
|
)
|
|
|
|
Interest, net (1)
|
|
|
(458
|
)
|
|
|
(472
|
)
|
|
|
|
Subtotal
|
|
|
752
|
|
|
|
713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book taxes (1)
|
|
|
(170
|
)
|
|
|
(167
|
)
|
|
|
|
Certain items
|
|
|
|
|
|
|
|
|
|
Fair value amortization
|
|
|
8
|
|
|
|
11
|
|
|
|
|
Legal and environmental reserves
|
|
|
—
|
|
|
|
(37
|
)
|
|
|
|
Change in fair market value of derivative contracts (3)
|
|
|
(10
|
)
|
|
|
(40
|
)
|
|
|
|
Refund and reserve adjustment of taxes, other than income taxes
|
|
|
(17
|
)
|
|
|
18
|
|
|
|
|
Other
|
|
|
6
|
|
|
|
(3
|
)
|
|
|
|
Subtotal certain items before tax
|
|
|
(13
|
)
|
|
|
(51
|
)
|
|
|
|
Book tax certain items
|
|
|
(2
|
)
|
|
|
3
|
|
|
|
|
Impact of 2017 Tax Cuts and Jobs Act
|
|
|
—
|
|
|
|
44
|
|
|
|
|
Total certain items
|
|
|
(15
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests before certain
items
|
|
|
(11
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
—
|
|
|
|
(39
|
)
|
|
|
|
Net income available to common stockholders
|
|
|
$
|
556
|
|
|
|
$
|
485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
|
$
|
556
|
|
|
|
$
|
485
|
|
|
|
|
Total certain items
|
|
|
15
|
|
|
|
4
|
|
|
|
|
Adjusted earnings
|
|
|
571
|
|
|
|
489
|
|
|
|
|
DD&A and amortization of excess cost of equity investments (4)
|
|
|
708
|
|
|
|
690
|
|
|
|
|
Total book taxes (5)
|
|
|
195
|
|
|
|
184
|
|
|
|
|
Cash taxes (6)
|
|
|
(13
|
)
|
|
|
(13
|
)
|
|
|
|
Other items (7)
|
|
|
25
|
|
|
|
11
|
|
|
|
|
Sustaining capital expenditures (8)
|
|
|
(115
|
)
|
|
|
(114
|
)
|
|
|
|
DCF
|
|
|
$
|
1,371
|
|
|
|
$
|
1,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for dividends (9)
|
|
|
2,275
|
|
|
|
2,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DCF per common share
|
|
|
$
|
0.60
|
|
|
|
$
|
0.56
|
|
|
|
|
Declared dividend per common share
|
|
|
$
|
0.25
|
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (10)
|
|
|
$
|
1,947
|
|
|
|
$
|
1,902
|
|
|
|
2
|
%
|
|
Notes ($ million)
|
(1)
|
|
Excludes certain items: 1Q 2019 - Natural Gas Pipelines $2,
Products Pipelines $(17), CO2 $9, Kinder Morgan Canada $(2), general
and administrative and corporate charges $(3), interest expense
$(2), book tax $(2). 1Q 2018 - Natural Gas Pipelines $54,
Products Pipelines $(31), Terminals $(1), CO2 $(38), general and
administrative and corporate charges $4, interest expense $5, book
tax $3.
|
(2)
|
|
Includes corporate (benefit) charges: 1Q 2019 - $7 1Q 2018
- $(13)
|
(3)
|
|
Gains or losses are reflected in our DCF when realized.
|
(4)
|
|
Includes KMI's share of equity investees' DD&A, net of the
noncontrolling interests' portion of KML DD&A and consolidating
joint venture partners' share of DD&A: 1Q 2019 - $94 1Q
2018 - $88
|
(5)
|
|
Excludes book tax certain items. Also, includes KMI's share of
taxable equity investees' book taxes, net of the noncontrolling
interests' portion of KML book taxes: 1Q 2019 - $25 1Q
2018 - $17
|
(6)
|
|
Includes KMI's share of taxable equity investees' cash taxes: 1Q
2018 - $(10)
|
(7)
|
|
Includes non-cash pension expense and non-cash compensation
associated with our restricted stock program.
|
(8)
|
|
Includes KMI's share of equity investees' sustaining capital
expenditures (the same equity investees for which DD&A is added
back): 1Q 2019 - $(19) 1Q 2018 - $(16)
|
(9)
|
|
Includes restricted stock awards that participate in common share
dividends.
|
(10)
|
|
Net income is reconciled to Adjusted EBITDA as follows, with any
difference due to rounding:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Net income
|
|
|
567
|
|
|
|
542
|
|
|
|
Total certain items
|
|
|
15
|
|
|
|
4
|
|
|
|
Net income attributable to noncontrolling interests (11)
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
DD&A and amortization of excess cost of equity investments (4) (12)
|
|
|
713
|
|
|
|
700
|
|
|
|
Book taxes (5) (12)
|
|
|
197
|
|
|
|
188
|
|
|
|
Interest, net (1)
|
|
|
458
|
|
|
|
472
|
|
|
|
Adjusted EBITDA
|
|
|
$
|
1,947
|
|
|
|
$
|
1,902
|
|
|
|
|
|
|
|
|
|
|
(11)
|
|
Excludes KML noncontrolling interests before certain items: 1Q
2019 - $9 1Q 2018 - $14
|
(12)
|
|
Includes the noncontrolling interests' portion of KML before certain
items: 1Q 2019 - DD&A $5; Book taxes $2 1Q 2018 - DD&A
$9; Book taxes $4
|
|
Volume Highlights
(historical pro forma for acquired and divested assets)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
Natural Gas Pipelines (1)
|
|
|
|
|
|
|
|
|
Transport Volumes (BBtu/d)
|
|
|
|
36,674
|
|
|
|
|
32,124
|
|
Sales Volumes (BBtu/d)
|
|
|
|
2,332
|
|
|
|
|
2,491
|
|
Gas Gathering Volumes (BBtu/d)
|
|
|
|
3,301
|
|
|
|
|
2,731
|
|
NGLs (MBbl/d) (2)
|
|
|
|
121
|
|
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
Products Pipelines (MBbl/d) (1)
|
|
|
|
|
|
|
|
|
Gasoline (3)
|
|
|
|
980
|
|
|
|
|
978
|
|
Diesel Fuel
|
|
|
|
337
|
|
|
|
|
342
|
|
Jet Fuel
|
|
|
|
294
|
|
|
|
|
289
|
|
Total Refined Product Volumes
|
|
|
|
1,611
|
|
|
|
|
1,609
|
|
Crude and Condensate (4)
|
|
|
|
643
|
|
|
|
|
593
|
|
Total Delivery Volumes (MBbl/d)
|
|
|
|
2,254
|
|
|
|
|
2,202
|
|
|
|
|
|
|
|
|
|
|
Terminals (1)
|
|
|
|
|
|
|
|
|
Liquids Leasable Capacity (MMBbl)
|
|
|
|
91.9
|
|
|
|
|
90.5
|
|
Liquids Utilization %
|
|
|
|
93.9
|
%
|
|
|
|
91.4
|
%
|
Bulk Transload Tonnage (MMtons)
|
|
|
|
14.7
|
|
|
|
|
14.4
|
|
|
|
|
|
|
|
|
|
|
CO2 (1)
|
|
|
|
|
|
|
|
|
Sacroc Oil Production - Net
|
|
|
|
24.43
|
|
|
|
|
24.61
|
|
Yates Oil Production
|
|
|
|
7.25
|
|
|
|
|
7.73
|
|
Katz and Goldsmith Oil Production
|
|
|
|
4.11
|
|
|
|
|
5.20
|
|
Tall Cotton Oil Production
|
|
|
|
2.61
|
|
|
|
|
2.09
|
|
Total Oil Production - Net (MBbl/d)
|
|
|
|
38.40
|
|
|
|
|
39.63
|
|
NGL Sales Volumes (MBbl/d)
|
|
|
|
10.10
|
|
|
|
|
10.16
|
|
Southwest Colorado Production - Gross (Bcf/d)
|
|
|
|
1.31
|
|
|
|
|
1.25
|
|
Southwest Colorado Production - Net (Bcf/d)
|
|
|
|
0.61
|
|
|
|
|
0.58
|
|
Realized Weighted Average Oil Price per Bbl
|
|
|
|
$
|
48.67
|
|
|
|
|
$
|
59.72
|
|
Realized Weighted Average NGL Price per Bbl
|
|
|
|
$
|
25.98
|
|
|
|
|
$
|
30.39
|
|
|
Notes
|
(1)
|
|
Joint Venture volumes reported at KMI share.
|
(2)
|
|
Reflects January 1, 2019 transfer of certain assets and includes
Cochin, Utopia, and Cypress.
|
(3)
|
|
Gasoline volumes include ethanol pipeline volumes.
|
(4)
|
|
Reflects January 1, 2019 transfer of certain assets and includes
KMCC, Camino Real Crude, Double Eagle, Hiland Crude Gathering, and
Double H.
|
|
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Balance Sheets
(Unaudited)
(In millions)
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
221
|
|
|
|
$
|
3,280
|
|
Other current assets
|
|
|
2,041
|
|
|
|
2,442
|
|
Property, plant and equipment, net
|
|
|
37,782
|
|
|
|
37,897
|
|
Investments
|
|
|
7,770
|
|
|
|
7,481
|
|
Goodwill
|
|
|
21,965
|
|
|
|
21,965
|
|
Deferred charges and other assets
|
|
|
6,513
|
|
|
|
5,801
|
|
TOTAL ASSETS
|
|
|
$
|
76,292
|
|
|
|
$
|
78,866
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Short-term debt
|
|
|
$
|
2,502
|
|
|
|
$
|
3,388
|
|
Other current liabilities
|
|
|
2,507
|
|
|
|
4,169
|
|
Long-term debt
|
|
|
32,368
|
|
|
|
33,105
|
|
Preferred interest in general partner of KMP
|
|
|
100
|
|
|
|
100
|
|
Debt fair value adjustments
|
|
|
860
|
|
|
|
731
|
|
Other
|
|
|
2,794
|
|
|
|
2,176
|
|
Total liabilities
|
|
|
41,131
|
|
|
|
43,669
|
|
|
|
|
|
|
|
|
Redeemable Noncontrolling Interest
|
|
|
705
|
|
|
|
666
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
|
Other shareholders' equity
|
|
|
34,120
|
|
|
|
34,008
|
|
Accumulated other comprehensive loss
|
|
|
(508
|
)
|
|
|
(330
|
)
|
KMI equity
|
|
|
33,612
|
|
|
|
33,678
|
|
Noncontrolling interests
|
|
|
844
|
|
|
|
853
|
|
Total shareholders' equity
|
|
|
34,456
|
|
|
|
34,531
|
|
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND
SHAREHOLDERS' EQUITY
|
|
|
$
|
76,292
|
|
|
|
$
|
78,866
|
|
|
|
|
|
|
|
|
Net Debt (1)
|
|
|
$
|
34,819
|
|
|
|
$
|
33,352
|
|
Adjusted Net Debt (2)
|
|
|
34,819
|
|
|
|
34,151
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Twelve Months Ended
|
|
|
|
March 31,
|
|
|
December 31,
|
Reconciliation of Net Income to Adjusted EBITDA
|
|
|
2019
|
|
|
2018
|
Net income
|
|
|
$
|
1,945
|
|
|
|
$
|
1,919
|
|
Total certain items
|
|
|
512
|
|
|
|
501
|
|
Net income attributable to noncontrolling interests (3)
|
|
|
(251
|
)
|
|
|
(252
|
)
|
DD&A and amortization of excess cost of equity investments (4)
|
|
|
2,795
|
|
|
|
2,782
|
|
Income tax expense before certain items (5)
|
|
|
736
|
|
|
|
727
|
|
Interest, net before certain items
|
|
|
1,877
|
|
|
|
1,891
|
|
Adjusted EBITDA
|
|
|
$
|
7,614
|
|
|
|
$
|
7,568
|
|
|
|
|
|
|
|
|
Net Debt to Adjusted EBITDA
|
|
|
4.6
|
|
|
|
4.4
|
|
Adjusted Net Debt to Adjusted EBITDA
|
|
|
4.6
|
|
|
|
4.5
|
|
|
|
Notes
|
|
(1)
|
|
Amounts include 50% of KML preferred shares, which is included in
noncontrolling interests, of $215 million. Amounts exclude: (i) the
preferred interest in general partner of KMP; (ii) debt fair value
adjustments; and (iii) the foreign exchange impact on our Euro
denominated debt of $45 million and $76 million as of March 31, 2019
and December 31, 2018, respectively, as we have entered into swaps
to convert that debt to U.S.$.
|
(2)
|
|
The December 31, 2018 cash component was (i) reduced by $890
million, representing the portion of cash KML distributed to KML
restricted voting shareholders on January 3, 2019 as a return of
capital; and (ii) increased by $91 million, representing the
unrecognized gain as of December 31, 2018 on net investment hedges
which hedged our exposure to foreign currency risk associated with a
substantial portion of our share of the proceeds from the sale of
TMPL, TMEP and related assets.
|
(3)
|
|
2019 and 2018 amounts exclude KML noncontrolling interests before
certain items of $52 million and $58 million, respectively.
|
(4)
|
|
2019 and 2018 amounts include KMI's share of certain equity
investees' DD&A of $392 million and $390 million, respectively.
|
(5)
|
|
2019 and 2018 amounts include KMI's share of taxable equity
investees' book taxes before certain items of $88 million and $82
million, respectively.
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20190417005711/en/
Copyright Business Wire 2019