Kinder Morgan, Inc. (NYSE: KMI) today announced that its board of directors approved a cash dividend of $0.20 per share for the third quarter ($0.80 annualized) payable on November 15, 2018, to common stockholders of record as of the close of business on October 31, 2018. KMI is reporting third quarter net income available to common stockholders of $693 million, versus $334 million in the third quarter of 2017; and distributable cash flow (DCF) of $1.1 billion, a 4 percent increase over the third quarter of 2017. KMI’s DCF number does not include the impact of the one-time gain on the sale of the Trans Mountain pipeline system. KMI continued to fund all growth capital through operating cash flows with no need to access capital markets for that purpose.
“The dividend we are declaring is once again a 60 percent increase from last year’s fourth quarter dividend, and is consistent with the plan KMI announced during the summer of 2017,” said Richard D. Kinder, Executive Chairman. “We made tremendous progress on our balance sheet and on developing attractive new projects during the quarter.”
“The third quarter was a momentous one for our company,” Chief Executive Officer Steve Kean noted. “We closed the Trans Mountain transaction on August 31 and then made a final investment decision on the Permian Highway Pipeline Project less than a week later. Our three-year campaign to strengthen KMI’s balance sheet reached an important milestone as we ended the quarter with an Adjusted Net Debt-to-Adjusted EBITDA ratio of approximately 4.6 times. Consistent with that achievement, all three ratings agencies have provided formal notification that our credit ratings are on positive outlook for an upgrade, and S&P announced they expect to raise our rating in January.”
Kean continued, “We are maintaining our planned substantial dividend increase and we have also revised our long-term leverage target from at or below 5.0 times to around 4.5 times, which is consistent with where we ended the quarter.”
KMI President Kim Dang said, “This quarter reinforced the importance of our interconnected natural gas transportation network as that segment accounted for a substantial portion of the growth in segment earnings versus the third quarter of 2017. We continue to benefit from strategically positioned fee-based assets that generate predictable cash flows and a network that provides our customers with unrivaled flexibility. We also made good progress during the third quarter on the Gulf Coast Express Project and began work on the Permian Highway Pipeline Project. Both of those projects take advantage of the unparalleled market access afforded by our existing network.”
Dang continued, “Once again we had very good commercial and operating performance. Our third quarter earnings per common share of $0.31 includes the one-time gain on the sale of the Trans Mountain system. We achieved distributable cash flow (DCF) of $0.49 per common share in the quarter, representing 4 percent growth over the third quarter of 2017. This resulted in nearly $650 million of excess DCF above our declared dividend.”
As noted above, KMI reported third quarter net income available to common stockholders of $693 million, compared to net income of $334 million for the third quarter of 2017, and DCF of $1,093 million, up 4 percent from $1,055 million for the comparable period in 2017. The increase in DCF compared to the third quarter of 2017 was due to greater contributions across nearly all business segments, partially offset by a reduction in Kinder Morgan Canada earnings resulting from the Trans Mountain sale as well as higher sustaining capital expenditures. Net income available to common stockholders for the third quarter of 2018 also benefited from the gain on the Trans Mountain sale. KMI’s project backlog for the third quarter stood at $6.5 billion, an approximately $250 million increase over the second quarter of 2018, with additions of just under $800 million in new projects, primarily in the Natural Gas Pipelines segment, partially offset by approximately $550 million in projects placed in service and other capital adjustments. Excluding the CO2 segment projects, KMI expects the projects in the backlog to generate an average capital-to-EBITDA multiple of approximately 5.4 times.
For the first nine months of 2018, KMI reported net income available to common stockholders of $998 million, compared to $1,072 million for the first nine months of 2017, and DCF of $3,457 million, up 5 percent from $3,292 million for the comparable period in 2017. The increase in DCF was driven by greater contributions from all KMI business units, partially offset by a reduction in Kinder Morgan Canada earnings resulting from the sale of the Trans Mountain system and higher sustaining capital expenditures. Net income available to common stockholders was reduced by a $488 million unfavorable change in total Certain Items compared to the first nine months of 2017, as the gain on the sale of the Trans Mountain system was more than offset by an impairment taken in the previous quarter.
2018 Outlook
For 2018, KMI’s budget contemplates declared dividends of $0.80 per common share, DCF of approximately $4.57 billion ($2.05 per common share) and Adjusted EBITDA of approximately $7.5 billion. We currently expect to exceed those DCF and Adjusted EBITDA targets. KMI forecasts to invest $2.5 billion in growth projects during 2018, up $300 million from the budget, to be funded with internally generated cash flow without the need to access capital markets. KMI also expects to beat its budgeted leverage metric of a year-end Net Debt-to-Adjusted EBITDA ratio of approximately 5.1 times and expects to end the year with a ratio of 4.6 times, consistent with the current quarter (this ratio excludes the public share of the Kinder Morgan Canada Limited (KML) cash proceeds from the Trans Mountain transaction of approximately $0.9 billion).
The KML distribution of the Trans Mountain sale proceeds is expected to occur on January 3, 2019, after a special meeting of KML shareholders on November 29, 2018. KMI consolidates all of the proceeds on its balance sheet, but only owns an approximately 70 percent interest in KML. KMI plans to use its approximately $2 billion share of proceeds to pay down debt.
KMI does not provide budgeted net income attributable to common stockholders (the GAAP financial measure most directly comparable to DCF and Adjusted EBITDA) due to the impracticality of predicting certain amounts required by GAAP, such as ineffectiveness on commodity, interest rate and foreign currency hedges, unrealized gains and losses on derivatives marked to market, and potential changes in estimates for certain contingent liabilities.
KMI’s budgeted expectations assumed average annual prices for West Texas Intermediate (WTI) crude oil of $56.50 per barrel and Henry Hub natural gas of $3.00 per MMBtu, consistent with forward pricing during the company’s budget process. The vast majority of cash KMI generates is fee-based and therefore not directly exposed to commodity prices. 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 35,459 barrels per day (Bbl/d) at $58.14/Bbl in 2018; 29,272 Bbl/d at $56.41/Bbl in 2019; 15,800 Bbl/d at $56.56/Bbl in 2020; 9,100 Bbl/d at $55.10/Bbl in 2021; and 3,300 Bbl/d at $57.02/Bbl in 2022.
Overview of Business Segments
“The Natural Gas Pipelines segment had another outstanding quarter. The segment’s financial performance for the third quarter of 2018 was 9 percent higher relative to the third quarter of 2017, said KMI President Kim Dang. “The segment benefited from continued increased activity across our Midstream gathering and processing assets, primarily Hiland, KinderHawk, and South Texas due to increased drilling and production in the Bakken, Haynesville and Eagle Ford basins. The transmission assets saw higher revenue on El Paso Natural Gas (EPNG) and Natural Gas Pipeline Company of America (NGPL) due primarily to increased Permian-related activity, on Tennessee Gas Pipeline (TGP) due to projects placed in service, and on Colorado Interstate Gas (CIG) due to growing DJ basin production.”
Natural gas transport volumes were up 4 billion cubic feet per day (Bcf/d) or 14 percent compared to the third quarter of 2017, driven by higher throughput on TGP due to power demand and projects placed in service; on NGPL due to power demand; on EPNG due to additional Permian capacity sales; on CIG due to growing DJ basin production; and on the Texas Intrastates (Kinder Morgan Texas Pipeline/Tejas) due to higher utilization and incremental contracts with shippers serving Mexico and the Texas Gulf Coast industrial markets. Natural gas gathering volumes were up 20 percent from the third quarter of 2017 due primarily to higher volumes on the KinderHawk system.
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 net exports to Mexico, will increase by 39 percent to nearly 112 Bcf/d by 2027. Of the natural gas consumed in the U.S., about 40 percent moves on KMI pipelines. While a substantial majority of natural gas is consumed in industrial, commercial and residential heating uses, KMI expects future natural gas infrastructure opportunities over the next decade will also be driven by greater demand for gas-fired power generation across the country (expected to increase by 27 percent), LNG exports (expected to increase almost seven-fold), exports to Mexico (forecast to rise by 51 percent), and continued industrial development, particularly in the petrochemical industry.
“CO2 segment earnings were up 7 percent versus the second quarter of 2017 on increased volumes and strong NGL and CO2 prices. Third quarter 2018 combined oil production across all of our fields was up 2 percent compared to the same period in 2017 on a net to KMI basis, primarily due to increased volumes at our SACROC (up 4 percent) and Tall Cotton assets (up 28 percent), though Tall Cotton production was below plan. Third quarter 2018 net NGL sales volumes of 10.4 thousand barrels per day (MBbl/d) were up 8 percent compared to the same period in 2017. In total for the first nine months of 2018, oil production on a gross and net-to-KMI basis was up 2 and 3 percent respectively versus the comparable period in 2017,” Dang said. “The segment was also helped during the quarter by higher NGL and CO2 prices, as NGL prices were up 48 percent and CO2 prices up 12 percent compared to the same period last year. Our realized weighted average oil price for the quarter was essentially flat at $57.96 per barrel compared to $58.29 per barrel for the third quarter of 2017, given our hedge position as well as the increase in the Midland-Cushing differential. For the remainder of 2018 and 2019 we have substantially hedged the Mid-Cush differential.
“Terminals segment earnings were up 1 percent compared to the third quarter of 2017. Contributions from our liquids business, which accounts for approximately 81 percent of the segment total, were up 2 percent driven by storage capacity increases in key hubs along the Houston Ship Channel and Edmonton, Alberta, as well as the full-period impact of new-build Jones Act tankers delivered in 2017,” said Dang. “These contributions were partially offset by the impact of contract expirations at certain of our crude-by-rail facilities in Edmonton and Houston, tank lease expenses at our Edmonton South Terminal following the sale of Trans Mountain, and continued softness in the New York Harbor refined products storage market, particularly at our Staten Island, New York location. Contributions from our bulk business were down 3 percent compared to the third quarter of 2017 with earnings impacted by certain asset divestitures and higher fuel and labor costs at our steel handling operations.”
“The Products Pipelines segment earnings were up 2 percent compared with third quarter 2017 performance due to contributions from the Cochin and Double H Pipelines, partially offset by reduced contributions from SFPP,” Dang said.
Total refined products volumes were up 2 percent for the third quarter versus the same period in 2017. Ethanol volumes for the quarter were up 9 percent while crude and condensate pipeline volumes were up 13 percent compared to the third quarter of 2017.
Kinder Morgan Canada contributions were down 36 percent in the third quarter of 2018 compared to the third quarter of 2017, largely due to the loss of September 2018 Trans Mountain earnings subsequent to the sale closing on August 31, 2018.
Other News
Natural Gas Pipelines
CO2
Terminals
Products Pipelines
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 152 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, October 17, at www.kindermorgan.com for a LIVE webcast conference call on the company’s third quarter earnings.
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.
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 that any such forward-looking statements will materialize. 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, 2017 (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) |
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Three Months Ended |
Nine Months Ended |
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2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||
Revenues | $ | 3,517 | $ | 3,281 | $ | 10,363 | $ | 10,073 | ||||||||||||||||||
Costs, expenses and other | ||||||||||||||||||||||||||
Costs of sales | 1,135 | 1,007 | 3,222 | 3,138 | ||||||||||||||||||||||
Operations and maintenance | 646 | 609 | 1,882 | 1,698 | ||||||||||||||||||||||
Depreciation, depletion and amortization | 569 | 562 | 1,710 | 1,697 | ||||||||||||||||||||||
General and administrative | 154 | 168 | 491 | 509 | ||||||||||||||||||||||
Taxes, other than income taxes | 86 | 102 | 259 | 297 | ||||||||||||||||||||||
(Gain) loss on divestitures and impairments, net | (588 | ) | 7 | 65 | 13 | |||||||||||||||||||||
Other income, net | — | — | (2 | ) | — | |||||||||||||||||||||
2,002 | 2,455 | 7,627 | 7,352 | |||||||||||||||||||||||
Operating income | 1,515 | 826 | 2,736 | 2,721 | ||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||
Earnings from equity investments | 160 | 167 | 708 | 477 | ||||||||||||||||||||||
Loss on impairment of equity investment | — | — | (270 | ) | — | |||||||||||||||||||||
Amortization of excess cost of equity investments | (21 | ) | (15 | ) | (77 | ) | (45 | ) | ||||||||||||||||||
Interest, net | (473 | ) | (459 | ) | (1,456 | ) | (1,387 | ) | ||||||||||||||||||
Other, net | 20 | 28 | 90 | 71 | ||||||||||||||||||||||
Income before income taxes | 1,201 | 547 | 1,731 | 1,837 | ||||||||||||||||||||||
Income tax expense | (196 | ) | (160 | ) | (314 | ) | (622 | ) | ||||||||||||||||||
Net income | 1,005 | 387 | 1,417 | 1,215 | ||||||||||||||||||||||
Net income attributable to noncontrolling interests | (273 | ) | (14 | ) | (302 | ) | (26 | ) | ||||||||||||||||||
Net income attributable to Kinder Morgan, Inc. | 732 | 373 | 1,115 | 1,189 | ||||||||||||||||||||||
Preferred stock dividends | (39 | ) | (39 | ) | (117 | ) | (117 | ) | ||||||||||||||||||
Net income available to common stockholders | $ | 693 | $ | 334 | $ | 998 | $ | 1,072 | ||||||||||||||||||
Class P Shares | ||||||||||||||||||||||||||
Basic and diluted earnings per common share | $ | 0.31 | $ | 0.15 | $ | 0.45 | $ | 0.48 | ||||||||||||||||||
Basic and diluted weighted average common shares outstanding | 2,205 | 2,231 | 2,205 | 2,230 | ||||||||||||||||||||||
Declared dividend per common share | $ | 0.20 | $ | 0.125 | $ | 0.60 | $ | 0.375 | ||||||||||||||||||
Adjusted earnings per common share (1) | $ | 0.21 | $ | 0.15 | $ | 0.64 | $ | 0.45 | ||||||||||||||||||
Segment EBDA |
% |
% |
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Natural Gas Pipelines | $ | 976 | $ | 884 | 10 | % | $ | 2,425 | $ | 2,846 | (15 | )% | ||||||||||||||
CO2 | 205 | 197 | 4 | % | 561 | 636 | (12 | )% | ||||||||||||||||||
Terminals | 301 | 314 | (4 | )% | 870 | 925 | (6 | )% | ||||||||||||||||||
Products Pipelines | 279 | 302 | (8 | )% | 857 | 913 | (6 | )% | ||||||||||||||||||
Kinder Morgan Canada | 654 | 50 | 1,208 | % | 746 | 136 | 449 | % | ||||||||||||||||||
Total Segment EBDA | $ | 2,415 | $ | 1,747 | 38 | % | $ | 5,459 | $ | 5,456 | — | % |
Note |
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(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. |
Kinder Morgan, Inc. and Subsidiaries
Preliminary Earnings Contribution by Business Segment (Unaudited) (In millions, except per share amounts) |
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Three Months Ended |
Nine Months Ended |
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2018 | 2017 |
% |
2018 | 2017 |
% |
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Segment EBDA before certain items (1) | ||||||||||||||||||||||||||
Natural Gas Pipelines | $ | 1,009 | $ | 928 | 9 | % | $ | 3,092 | $ | 2,852 | 8 | % | ||||||||||||||
CO2 | 233 | 217 | 7 | % | 691 | 659 | 5 | % | ||||||||||||||||||
Terminals | 299 | 296 | 1 | % | 903 | 897 | 1 | % | ||||||||||||||||||
Products Pipelines | 309 | 302 | 2 | % | 917 | 879 | 4 | % | ||||||||||||||||||
Kinder Morgan Canada | 32 | 50 | (36 | )% | 124 | 136 | (9 | )% | ||||||||||||||||||
Subtotal | 1,882 | 1,793 | 5 | % | 5,727 | 5,423 | 6 | % | ||||||||||||||||||
DD&A and amortization of excess investments | (590 | ) | (577 | ) | (1,787 | ) | (1,742 | ) | ||||||||||||||||||
General and administrative and corporate charges (1) (2) | (143 | ) | (159 | ) | (467 | ) | (482 | ) | ||||||||||||||||||
Interest, net (1) | (473 | ) | (463 | ) | (1,422 | ) | (1,408 | ) | ||||||||||||||||||
Subtotal | 676 | 594 | 2,051 | 1,791 | ||||||||||||||||||||||
Book taxes (1) | (151 | ) | (213 | ) | (463 | ) | (646 | ) | ||||||||||||||||||
Certain items | ||||||||||||||||||||||||||
Fair value amortization | 7 | 8 | 27 | 42 | ||||||||||||||||||||||
Contract early termination (3) | — | (7 | ) | (1 | ) | 19 | ||||||||||||||||||||
Legal and environmental reserves | (16 | ) | 11 | (53 | ) | 43 | ||||||||||||||||||||
Change in fair market value of derivative contracts (4) | (47 | ) | (32 | ) | (190 | ) | (27 | ) | ||||||||||||||||||
Gains (losses) on divestitures and impairments, net (5) | 582 | (7 | ) | (208 | ) | (13 | ) | |||||||||||||||||||
Hurricane damage recoveries, net | 1 | (9 | ) | 25 | (9 | ) | ||||||||||||||||||||
Refund and reserve adjustment of taxes, other than income taxes | 12 | — | 51 | — | ||||||||||||||||||||||
Other | (6 | ) | (11 | ) | (7 | ) | (9 | ) | ||||||||||||||||||
Noncontrolling interests' portion of certain items | (256 | ) | — | (248 | ) | (1 | ) | |||||||||||||||||||
Subtotal certain items before tax | 277 | (47 | ) | (604 | ) | 45 | ||||||||||||||||||||
Book tax certain items | (45 | ) | 53 | 149 | 24 | |||||||||||||||||||||
Impact of 2017 Tax Cuts and Jobs Act | (8 | ) | — | 36 | — | |||||||||||||||||||||
Total certain items | 224 | 6 | (419 | ) | 69 | |||||||||||||||||||||
Net income attributable to noncontrolling interests before certain items (1) | (17 | ) | (14 | ) | (54 | ) | (25 | ) | ||||||||||||||||||
Preferred stock dividends | (39 | ) | (39 | ) | (117 | ) | (117 | ) | ||||||||||||||||||
Net income available to common stockholders | $ | 693 | $ | 334 | $ | 998 | $ | 1,072 | ||||||||||||||||||
Net income available to common stockholders | $ | 693 | $ | 334 | $ | 998 | $ | 1,072 | ||||||||||||||||||
Total certain items | (224 | ) | (6 | ) | 419 | (69 | ) | |||||||||||||||||||
Adjusted earnings | 469 | 328 | 1,417 | 1,003 | ||||||||||||||||||||||
DD&A and amortization of excess investments (6) | 682 | 661 | 2,056 | 2,018 | ||||||||||||||||||||||
Total book taxes (7) | 169 | 241 | 512 | 725 | ||||||||||||||||||||||
Cash taxes (8) | (14 | ) | (9 | ) | (60 | ) | (54 | ) | ||||||||||||||||||
Other items (9) | (19 | ) | (10 | ) | 3 | 16 | ||||||||||||||||||||
Sustaining capital expenditures (10) | (194 | ) | (156 | ) | (471 | ) | (416 | ) | ||||||||||||||||||
DCF | $ | 1,093 | $ | 1,055 | $ | 3,457 | $ | 3,292 | ||||||||||||||||||
Weighted average common shares outstanding for dividends (11) | 2,218 | 2,241 | 2,217 | 2,240 | ||||||||||||||||||||||
DCF per common share | $ | 0.49 | $ | 0.47 | $ | 1.56 | $ | 1.47 | ||||||||||||||||||
Declared dividend per common share | $ | 0.20 | $ | 0.125 | $ | 0.60 | $ | 0.375 | ||||||||||||||||||
Adjusted EBITDA (12) | $ | 1,857 | $ | 1,754 | 6 | % | $ | 5,606 | $ | 5,302 | 6 | % |
Notes ($ million) |
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(1) | Excludes certain items: | |||
3Q 2018 - Natural Gas Pipelines $(33), CO2 $(28), Terminals $2, Products Pipelines $(30), Kinder Morgan Canada $622, general and administrative and corporate | ||||
charges $(8), book tax $(45), noncontrolling interests $(256). | ||||
3Q 2017 - Natural Gas Pipelines $(44), CO2 $(20), Terminals $18, general and administrative and corporate charges $(5), interest expense $4, book tax $53. | ||||
YTD 2018 - Natural Gas Pipelines $(667), CO2 $(130), Terminals $(33), Products Pipelines $(60), Kinder Morgan Canada $622, general and administrative and corporate | ||||
charges $(18), interest expense $(34), book tax $149, noncontrolling interests $(248). | ||||
YTD 2017 - Natural Gas Pipelines $(6), CO2 $(23), Terminals $28, Products Pipelines $34, general and administrative and corporate charges $(8), interest expense | ||||
$21, book tax $24, noncontrolling interests $(1). | ||||
(2) | Includes corporate (benefit) charges: | |||
3Q 2018 - $(3) | ||||
3Q 2017 - $4 | ||||
YTD 2018 - $(6) | ||||
YTD 2017 - $7 | ||||
General and administrative expense is also net of management fee revenues from an equity investee: | ||||
3Q 2017 - $(8) | ||||
YTD 2017 - $(26) | ||||
(3) | Comprised of earnings recognized related to the early termination of customer contracts, including earnings from the sale of a contract termination claim related to a customer bankruptcy. | |||
(4) | Gains or losses are reflected in our DCF when realized. | |||
(5) | 3Q 2018 and YTD 2018 amounts include a $622 million gain on the sale of TMPL, TMEP, and related assets. YTD 2018 amount also includes (i) a $600 million non-cash impairment of certain gathering and processing assets in Oklahoma; (ii) a $60 million non-cash impairment of certain Terminal business segment assets; and (iii) a net loss of $89 million representing an impairment of our equity investment in Gulf LNG Holdings Group, LLC (Gulf LNG) due to a ruling by an arbitration panel affecting a customer contract. | |||
(6) | Includes KMI's share of certain equity investees' DD&A, net of the noncontrolling interests' portion of KML DD&A and consolidating joint venture partners' share of | |||
DD&A: | ||||
3Q 2018 - $92 | ||||
3Q 2017 - $84 | ||||
YTD 2018 - $269 | ||||
YTD 2017 - $276 | ||||
(7) | 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: | |||
3Q 2018 - $18 | ||||
3Q 2017 - $28 | ||||
YTD 2018 - $49 | ||||
YTD 2017 - $79 | ||||
(8) | Includes KMI's share of taxable equity investees' cash taxes: | |||
3Q 2018 - $(12) | ||||
3Q 2017 - $(9) | ||||
YTD 2018 - $(50) | ||||
YTD 2017 - $(54) | ||||
(9) | Includes pension contributions and non-cash compensation associated with our restricted stock program. | |||
(10) | Includes KMI's share of certain equity investees' sustaining capital expenditures (the same equity investees for which DD&A is added back): | |||
3Q 2018 - $(37) | ||||
3Q 2017 - $(29) | ||||
YTD 2018 - $(77) | ||||
YTD 2017 - $(74) | ||||
(11) | Includes restricted stock awards that participate in common share dividends. | |||
(12) | Net income is reconciled to Adjusted EBITDA as follows, with any difference due to rounding: |
Three Months Ended |
Nine Months Ended |
||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Net income | 1,005 | 387 | 1,417 | 1,215 | |||||||||||||||||||||||
Total certain items | (224 | ) | (6 | ) | 419 | (69 | ) | ||||||||||||||||||||
Net income attributable to noncontrolling interests (13) | (259 | ) | (3 | ) | (257 | ) | (12 | ) | |||||||||||||||||||
DD&A and amortization of excess investments (6) (14) | 689 | 669 | 2,080 | 2,030 | |||||||||||||||||||||||
Book taxes (7) (14) | 173 | 244 | 525 | 730 | |||||||||||||||||||||||
Interest, net (1) | 473 | 463 | 1,422 | 1,408 | |||||||||||||||||||||||
Adjusted EBITDA | $ | 1,857 | $ | 1,754 | $ | 5,606 | $ | 5,302 |
(13) | Excludes KML noncontrolling interests before certain items: | ||
3Q 2018 - $15 | |||
3Q 2017 - $11 | |||
YTD 2018 - $45 | |||
YTD 2017 - $14 | |||
(14) | Includes the noncontrolling interests' portion of KML before certain items: | ||
3Q 2018 - DD&A $7; Book taxes $4 | |||
3Q 2017 - DD&A $9; Book taxes $3 | |||
YTD 2018 - DD&A $25; Book taxes $13 | |||
YTD 2017 - DD&A $12; Book taxes $5 |
Volume Highlights
(historical pro forma for acquired and divested assets) |
||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
Natural Gas Pipelines | ||||||||||||||||||
Transport Volumes (BBtu/d) (1) | 32,867 | 28,879 | 32,234 | 28,796 | ||||||||||||||
Sales Volumes (BBtu/d) (2) | 2,615 | 2,181 | 2,517 | 2,329 | ||||||||||||||
Gas Gathering Volumes (BBtu/d) (3) | 3,025 | 2,516 | 2,877 | 2,629 | ||||||||||||||
Crude/Condensate Gathering Volumes (MBbl/d) (4) | 313 | 271 | 302 | 268 | ||||||||||||||
CO2 | ||||||||||||||||||
Southwest Colorado Production - Gross (Bcf/d) (5) | 1.20 | 1.23 | 1.20 | 1.29 | ||||||||||||||
Southwest Colorado Production - Net (Bcf/d) (5) | 0.55 | 0.57 | 0.55 | 0.62 | ||||||||||||||
Sacroc Oil Production - Gross (MBbl/d) (6) | 28.68 | 27.46 | 29.13 | 27.73 | ||||||||||||||
Sacroc Oil Production - Net (MBbl/d) (7) | 23.89 | 22.87 | 24.26 | 23.09 | ||||||||||||||
Yates Oil Production - Gross (MBbl/d) (6) | 16.54 | 17.08 | 16.86 | 17.45 | ||||||||||||||
Yates Oil Production - Net (MBbl/d) (7) | 7.49 | 7.55 | 7.55 | 7.75 | ||||||||||||||
Katz, Goldsmith, and Tall Cotton Oil Production - Gross (MBbl/d) (6) | 7.98 | 8.36 | 8.23 | 7.88 | ||||||||||||||
Katz, Goldsmith, and Tall Cotton Oil Production - Net (MBbl/d) (7) | 6.83 | 7.09 | 7.01 | 6.67 | ||||||||||||||
NGL Sales Volumes (MBbl/d) (8) | 10.44 | 9.64 | 10.22 | 9.88 | ||||||||||||||
Realized Weighted Average Oil Price per Bbl (9) | $ | 57.96 | $ | 58.29 | $ | 58.59 | $ | 58.08 | ||||||||||
Realized Weighted Average NGL Price per Bbl | $ | 36.46 | $ | 24.70 | $ | 33.30 | $ | 23.89 | ||||||||||
Terminals | ||||||||||||||||||
Liquids Leasable Capacity (MMBbl) | 89.9 | 85.6 | 89.9 | 85.6 | ||||||||||||||
Liquids Utilization % | 91.8 | % | 93.9 | % | 91.8 | % | 93.9 | % | ||||||||||
Bulk Transload Tonnage (MMtons) (10) | 16.3 | 15.5 | 47.6 | 44.4 | ||||||||||||||
Ethanol (MMBbl) | 16.0 | 17.8 | 47.1 | 51.3 | ||||||||||||||
Products Pipelines | ||||||||||||||||||
Pacific, Calnev, and CFPL (MBbl/d) | ||||||||||||||||||
Gasoline (11) | 849 | 844 | 825 | 813 | ||||||||||||||
Diesel | 324 | 309 | 308 | 295 | ||||||||||||||
Jet Fuel | 277 | 268 | 271 | 265 | ||||||||||||||
Sub-Total Refined Product Volumes - excl. Plantation | 1,450 | 1,421 | 1,404 | 1,373 | ||||||||||||||
Plantation (MBbl/d) (12) | ||||||||||||||||||
Gasoline | 217 | 227 | 218 | 229 | ||||||||||||||
Diesel | 61 | 55 | 62 | 52 | ||||||||||||||
Jet Fuel | 35 | 30 | 31 | 32 | ||||||||||||||
Sub-Total Refined Product Volumes - Plantation | 313 | 312 | 311 | 313 | ||||||||||||||
Total (MBbl/d) | ||||||||||||||||||
Gasoline (11) | 1,066 | 1,071 | 1,043 | 1,042 | ||||||||||||||
Diesel | 385 | 364 | 370 | 347 | ||||||||||||||
Jet Fuel | 312 | 298 | 302 | 297 | ||||||||||||||
Total Refined Product Volumes | 1,763 | 1,733 | 1,715 | 1,686 | ||||||||||||||
NGLs (MBbl/d) (13) | 117 | 108 | 118 | 112 | ||||||||||||||
Crude and Condensate (MBbl/d) (14) | 327 | 289 | 335 | 323 | ||||||||||||||
Total Delivery Volumes (MBbl/d) | 2,207 | 2,130 | 2,168 | 2,121 | ||||||||||||||
Ethanol (MBbl/d) (15) | 132 | 121 | 127 | 116 | ||||||||||||||
Trans Mountain (MMBbl/d - mainline throughput) (16) | 292 | 319 | 291 | 309 |
Notes |
|||
(1) | Includes Texas Intrastates, Copano South Texas, KMNTP, Monterrey, TransColorado, MEP, KMLA, FEP, TGP, EPNG, CIG, WIC, Cheyenne Plains, SNG, Elba Express, Ruby, Sierrita, NGPL, and Citrus pipeline volumes. Joint Venture throughput reported at KMI share. | ||
(2) | Includes Texas Intrastates and KMNTP. | ||
(3) | Includes Copano Oklahoma, Copano South Texas, Eagle Ford Gathering, Copano North Texas, Altamont, KinderHawk, Camino Real, Bighorn, Webb/Duval Gatherers, Fort Union, EagleHawk, Red Cedar, and Hiland Midstream throughput. Joint Venture throughput reported at KMI share. | ||
(4) | Includes Hiland Midstream, EagleHawk, and Camino Real. Joint Venture throughput reported at KMI share. | ||
(5) | Includes McElmo Dome and Doe Canyon sales volumes. | ||
(6) | Represents 100% production from the field. | ||
(7) | Represents KMI's net share of the production from the field. | ||
(8) | Net to KMI. | ||
(9) | Includes all KMI crude oil properties. | ||
(10) | Includes KMI's share of Joint Venture tonnage. | ||
(11) | Gasoline volumes include ethanol pipeline volumes. | ||
(12) | Plantation reported at KMI share. | ||
(13) | Includes Cochin, Utopia (KMI share), and Cypress (KMI share). | ||
(14) | Includes KMCC, Double Eagle (KMI share), and Double H. | ||
(15) | Total ethanol handled including pipeline volumes included in gasoline volumes above. | ||
(16) | Throughput reported until date of sale, August 31, 2018. |
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Balance Sheets (Unaudited) (In millions) |
|||||||||||
September 30, | December 31, | ||||||||||
2018 | 2017 | ||||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 3,459 | $ | 264 | |||||||
Other current assets | 2,307 | 2,451 | |||||||||
Property, plant and equipment, net | 37,795 | 40,155 | |||||||||
Investments | 7,432 | 7,298 | |||||||||
Goodwill | 21,965 | 22,162 | |||||||||
Deferred charges and other assets | 6,105 | 6,725 | |||||||||
TOTAL ASSETS | $ | 79,063 | $ | 79,055 | |||||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY | |||||||||||
Liabilities | |||||||||||
Short-term debt | $ | 2,337 | $ | 2,828 | |||||||
Other current liabilities | 3,152 | 3,353 | |||||||||
Long-term debt | 34,625 | 33,988 | |||||||||
Preferred interest in general partner of KMP | 100 | 100 | |||||||||
Debt fair value adjustments | 543 | 927 | |||||||||
Other | 2,407 | 2,735 | |||||||||
Total liabilities | 43,164 | 43,931 | |||||||||
Redeemable Noncontrolling Interest | 633 | — | |||||||||
Shareholders' Equity | |||||||||||
Other shareholders' equity | 33,982 | 34,177 | |||||||||
Accumulated other comprehensive loss | (495 | ) | (541 | ) | |||||||
KMI equity | 33,487 | 33,636 | |||||||||
Noncontrolling interests | 1,779 | 1,488 | |||||||||
Total shareholders' equity | 35,266 | 35,124 | |||||||||
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY | $ | 79,063 | $ | 79,055 | |||||||
Net Debt (1) | $ | 33,410 | $ | 36,409 | |||||||
Adjusted Net Debt (2) | 34,544 | 36,624 | |||||||||
Adjusted EBITDA |
|||||||||||
September 30, | December 31, | ||||||||||
Reconciliation of Net Income to Adjusted EBITDA | 2018 | 2017 | |||||||||
Net income | $ | 425 | $ | 223 | |||||||
Total certain items | 1,933 | 1,445 | |||||||||
Net income attributable to noncontrolling interests (3) | (258 | ) | (12 | ) | |||||||
DD&A and amortization of excess investments (4) | 2,755 | 2,704 | |||||||||
Income tax expense before certain items (5) | 762 | 967 | |||||||||
Interest, net before certain items | 1,885 | 1,871 | |||||||||
Adjusted EBITDA | $ | 7,502 | $ | 7,198 | |||||||
Net Debt to Adjusted EBITDA | 4.5 | 5.1 | |||||||||
Adjusted Net Debt to Adjusted EBITDA | 4.6 | 5.1 |
Notes |
|||
(1) | 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 $93 million and $143 million as of September 30, 2018 and December 31, 2017, respectively, as we have entered into swaps to convert that debt to U.S.$. | ||
(2) | Amounts include 50% of KML preferred shares, which is included in noncontrolling interests, of $215 million as of both September 30, 2018 and December 31, 2017. Also, the cash component as of September 30, 2018 has been reduced by $919 million, representing the portion of cash KML intends to distribute to KML restricted voting shareholders early in 2019 as a return of capital subject to KML shareholder approval. | ||
(3) | 2018 and 2017 amounts exclude KML noncontrolling interests before certain items of $58 million and $27 million, respectively. | ||
(4) | 2018 and 2017 amounts include KMI's share of certain equity investees' DD&A of $388 million and $382 million, respectively. | ||
(5) | 2018 and 2017 amounts include KMI's share of taxable equity investees' book taxes before certain items of $93 million and $114 million, respectively. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20181017005843/en/
Kinder Morgan, Inc.
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