Kinder Morgan, Inc. (NYSE: KMI) today announced that its board of directors approved a cash dividend of $0.125 per share for the third quarter ($0.50 annualized) payable on November 15, 2017, to common stockholders of record as of the close of business on October 31, 2017. KMI continues to expect to declare dividends of $0.50 per share for 2017 before increasing the dividend to $0.80 per share for 2018 ($0.20 per share for Q1 2018). KMI also continues to expect to use cash in excess of dividend payments to fully fund growth investments, further strengthening its balance sheet.
“We remain on track to return increasing value to stockholders in 2018 through the combination of an attractive and growing dividend as well as the share repurchase program we announced last quarter. Our goal of maintaining robust dividend coverage while delivering a substantial dividend increase to stockholders out of operating cash flows in excess of growth capital remains clearly in sight,” said Richard D. Kinder, executive chairman.
“At the same time, we continue the important work of strengthening our balance sheet, continuing to fund all growth capital through operating cash flows with no need for external funding for growth capital,” said Kinder. “We continue to expect to end 2017 at a 5.2 times Net Debt-to-Adjusted EBITDA ratio, lower than our budget, and are confident of achieving our longer term leverage target of approximately 5.0 times. We are extremely pleased with the company’s financial strength and operational excellence.”
President and CEO Steve Kean said, “We had a solid third quarter, especially in the face of multiple named storms, including a historic rainfall event associated with Hurricane Harvey. Hundreds of our employees and their families were affected by these storms, but they and the assets they operate proved resilient and strong. Our response was robust and impacts on our customers and operations were minimized. We generated earnings per common share for the quarter of $0.15 and distributable cash flow (DCF) of $0.47 per common share, resulting in $774 million of excess DCF above our dividend.”
Kean added, “We continue to drive future growth by completing significant infrastructure development projects that we track as part of our project backlog. Our current project backlog is essentially flat quarter-to-quarter at $12.0 billion, with the small decrease primarily due to projects going into service. Excluding the CO2 segment projects, we expect the projects in our backlog to generate an average capital-to-EBITDA multiple of approximately 6.8 times.”
KMI reported third quarter net income available to common stockholders of $334 million, compared to a net loss available to common stockholders of $227 million for the third quarter of 2016, and DCF of $1,055 million, down slightly from $1,081 million for the comparable period in 2016. The decrease in DCF was driven by: lower contributions from Southern Natural Gas Company (SNG) as a result of the 50 percent sale of SNG during the third quarter of 2016; reduced revenue due to Hurricane Harvey; a contribution to KMI’s pension plan; a reduction in contributions from KMI’s Canadian assets due to the successful second quarter initial public offering (IPO) of Kinder Morgan Canada Limited (KML); and higher sustaining capex. These reductions were partially offset by lower interest expense and higher contributions from Tennessee Gas Pipeline (TGP). Net income available to common stockholders was also impacted by a $576 million favorable change in total Certain Items (as described under “Non-GAAP Financial Measures” below) compared to the third quarter of 2016. Third quarter 2016 Certain Items were driven in part by an asset write-down in that quarter.
For the first nine months of 2017, KMI reported net income available to common stockholders of $1,072 million, up substantially compared to $382 million for the first nine months of 2016, and DCF of $3,292 million that was down from $3,364 million for the comparable period in 2016. The decrease in DCF was driven by the sale of 50 percent of SNG, the impacts of Harvey, the contribution to KMI’s pension plan, the KML IPO, and higher sustaining capex, partially offset by lower interest expense and lower general and administrative expenses. Net income available to common stockholders was also impacted by a $764 million decrease in total Certain Items compared to the first nine months of 2016. Certain Items in the first nine months of 2016 were driven by an asset write-down and project write-offs.
2017 Outlook
For 2017, KMI’s budget was set to declare dividends of $0.50 per common share, achieve DCF of approximately $4.46 billion ($1.99 per common share) and Adjusted EBITDA of approximately $7.2 billion. KMI also budgeted to invest $3.2 billion in growth projects during 2017, to be funded with internally generated cash flow without the need to access equity markets, and to end the year with a Net Debt-to-Adjusted EBITDA ratio of approximately 5.4 times.
As a result of the successful IPO of its Canadian assets and impacts from Hurricane Harvey, KMI now expects to end the year with: a Net Debt-to-Adjusted EBITDA ratio of approximately 5.2 times, as proceeds from the KML IPO were used to pay down debt; growth capital investment of $3.1 billion; and DCF less than 1 percent below budget. The $3.1 billion in growth capital does not include KML-related expansion capex as KML is a self-funding entity and KMI does not anticipate making further contributions. Excluding the full-year impacts of KMI’s sale of a 30 percent interest in its Canadian assets in the IPO (approximately $22 million) and Hurricane Harvey, DCF is forecasted to be on plan. KMI estimates that Hurricane Harvey will have a 2017 DCF impact of approximately $20 million, excluding repair costs that are treated as Certain Items. KMI expects that these repair costs, both those incurred in the third quarter and those expected to be incurred in the fourth quarter, will largely be recovered from insurance proceeds. 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 inherent difficulty and 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 expectations assume average annual prices for West Texas Intermediate (WTI) crude oil of $53 per barrel and Henry Hub natural gas of $3 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 34,200 barrels per day (Bbl/d) at $58.91/Bbl for the remainder of the year, as well as 23,532 Bbl/d at $59.03/Bbl in 2018; 13,100 Bbl/d at $55.34/Bbl in 2019; 7,300 Bbl/d at $53.08/Bbl in 2020; and 2,400 Bbl/d at $52.45/Bbl in 2021.
Overview of Business Segments
“The Natural Gas Pipelines segment’s performance for the third quarter of 2017 relative to the third quarter of 2016 was impacted by the third quarter 2016 sale of a 50 percent interest in SNG, Harvey-related and other declines from reduced volumes on many of our midstream gathering and processing assets, and a negative impact on our Colorado Interstate Gas Company (CIG) pipeline tariff rates as a result of a rate case settlement reached during 2016. The segment again benefited from increased contributions from TGP driven by incremental short-term capacity sales and projects placed in service; from the Elba Express pipeline, resulting from the completion of an expansion project; and from El Paso Natural Gas (EPNG) due to additional Permian capacity sales and the completion of an expansion project,” Kean said.
Natural gas transport volumes were up 3 percent compared to the third quarter of 2016, driven by higher throughput on the Texas Intrastate Natural Gas Pipelines from incremental transportation contracts serving Mexico and contracts going into effect after the third quarter of 2016, as well as higher throughput on EPNG as noted above, and higher throughput on Elba Express resulting from the expansion on that system. The increases were partially offset by lower throughput on TransColorado, due to lower Rockies production, on Cheyenne Plains due to mild weather and fuel switching to coal, and on Citrus, also due to mild weather. Natural gas gathering volumes were down 14 percent from the third quarter of 2016 due primarily to Hurricane Harvey impacts and to lower natural gas volumes on multiple systems gathering from the Eagle Ford Shale and on the KinderHawk system.
Natural gas is critical to the American economy and to meeting the world’s evolving energy and manufacturing 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 more than 30 percent to greater than 100 billion cubic feet per day (Bcf/d) by 2026. 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 will also be driven by greater demand for gas-fired power generation across the country, LNG exports, exports to Mexico, and continued industrial development, particularly in the petrochemical industry. Compared to the third quarter of 2016, natural gas deliveries on KMI pipelines to Mexico were up 3 percent, and despite some reductions due to Hurricane Harvey, deliveries to the Sabine Pass LNG facility increased by 37 percent.
“The CO2 segment was impacted by lower commodity prices, as our realized weighted average oil price for the quarter was $58.29 per barrel compared to $62.12 per barrel for the third quarter of 2016,” Kean said. “Combined oil production across all of our fields was down 1 percent compared to 2016 on a net to Kinder Morgan basis. Third quarter 2017 net NGL sales volumes of 9.6 thousand barrels per day (MBbl/d) were down 9 percent from 2016, due to lower hydrocarbon content in the produced gas stream year over year.”
Combined gross oil production volumes averaged 52.9 MBbl/d for the third quarter, down 1 percent from 53.7 MBbl/d for the same period last year. SACROC’s third quarter gross production was 5 percent below third quarter 2016 results but slightly above 2017 budget, and Yates gross production was 4 percent below third quarter 2016 results and below plan. Both decreases were partially driven by reallocating capital to higher return projects with longer lead times. Third quarter gross production from Katz, Goldsmith and Tall Cotton was 21 percent above the same period in 2016, but below plan. Gross NGL sales volumes were 20 MBbl/d during the quarter, 8 percent below third quarter 2016.
“The Terminals segment earnings contributions were essentially flat compared to the third quarter of 2016 despite several strategic divestitures and operational disruptions associated with Hurricane Harvey. Excluding these items, the segment’s earnings would have been higher in the third quarter 2017 by approximately $20 million.
Growth in the liquids business during the quarter versus the third quarter of 2016 was primarily driven by increased contributions from our Jones Act tankers and also benefited from various expansions across our network, including the Kinder Morgan Export Terminal, a 1.5 million-barrel liquids terminal development along the Houston Ship Channel,” Kean said. A new-build Jones Act tanker, the American Liberty, was placed on-hire with a major refiner in the third quarter. All of KMI’s Jones Act tankers are contracted with major energy customers under term charter agreements.
The bulk terminals contribution was down largely due to the impact of certain non-core asset divestitures and disruptions to petcoke handling operations servicing Gulf Coast refiners impacted by Hurricane Harvey, while performance at our coal and steel handling operations continues to benefit from stabilizing global market conditions.
“The Products Pipelines segment contributions were up compared with third quarter 2016 performance due largely to increased throughput on SFPP and Kinder Morgan Southeast Terminals,” Kean said.
Total refined products volumes were up 1 percent for the third quarter versus the same period in 2016. Crude and condensate pipeline volumes were significantly impacted by Hurricane Harvey, down 8 percent from the third quarter of 2016.
Kinder Morgan Canada contributions were up in the third quarter of 2017 compared to the third quarter of 2016 largely due to currency translation gains on strengthening of the Canadian dollar. The business also had higher capitalized equity financing costs (recognized in other income) due to spending on the Trans Mountain expansion project. These positives were partially offset by lower Washington state revenues and timing of operating costs.
Kinder Morgan Canada Limited (KML) includes the Trans Mountain pipeline, the Canadian portion of the Cochin pipeline, the Puget Sound and Trans Mountain Jet Fuel pipelines, the Westridge marine and Vancouver Wharves terminals in British Columbia as well as various crude oil loading facilities in Edmonton, Alberta. KMI owns approximately 70 percent of KML and KML’s results are consolidated in KMI financial statements and reported on a 100 percent basis at the segment level.
Other News
Natural Gas Pipelines
CO2
Terminals
Products Pipelines
Kinder Morgan Canada
Financing
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy infrastructure companies in North America. It owns an interest in or operates approximately 84,000 miles of pipelines and 155 terminals. KMI’s pipelines transport natural gas, refined petroleum products, crude oil, condensate, CO2 and other products, and its terminals transload and store petroleum products, ethanol and chemicals, and handle such products as steel, coal and petroleum coke. It is also a leading producer of CO2 that we and others use for enhanced oil recovery projects primarily in the Permian basin. For more information please visit www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. Eastern Time 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
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 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, hurricane impacts and casualty losses).
DCF is a significant performance measure used by us and by external users of our financial statements to evaluate 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. Management uses this measure and believes it provides users of our financial statements a useful measure reflective of our business’s ability to generate cash earnings to supplement the comparable GAAP measure. 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 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 EBITDA is calculated by adjusting net income before interest expense, taxes, and DD&A (EBITDA) for Certain Items, noncontrolling interests before Certain Items, 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 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 our business’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 Adjusted 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 from 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, 2016 (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 September 30, |
Nine Months Ended September 30, |
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2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||||
Revenues | $ | 3,281 | $ | 3,330 | $ | 10,073 | $ | 9,669 | ||||||||||||||||||||||
Costs, expenses and other | ||||||||||||||||||||||||||||||
Costs of sales | 1,029 | 971 | 3,200 | 2,454 | ||||||||||||||||||||||||||
Operations and maintenance | 587 | 576 | 1,636 | 1,744 | ||||||||||||||||||||||||||
Depreciation, depletion and amortization | 562 | 549 | 1,697 | 1,652 | ||||||||||||||||||||||||||
General and administrative | 164 | 171 | 498 | 550 | ||||||||||||||||||||||||||
Taxes, other than income taxes | 102 | 106 | 297 | 324 | ||||||||||||||||||||||||||
Loss on impairments and divestitures, net | 7 | 76 | 13 | 307 | ||||||||||||||||||||||||||
Other income, net | — | (1 | ) | — | — | |||||||||||||||||||||||||
2,451 | 2,448 | 7,341 | 7,031 | |||||||||||||||||||||||||||
Operating income | 830 | 882 | 2,732 | 2,638 | ||||||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||
Earnings from equity investments | 167 | 137 | 477 | 343 | ||||||||||||||||||||||||||
Loss on impairments and divestitures of equity investments, net | — | (350 | ) | — | (344 | ) | ||||||||||||||||||||||||
Amortization of excess cost of equity investments | (15 | ) | (15 | ) | (45 | ) | (45 | ) | ||||||||||||||||||||||
Interest, net | (459 | ) | (472 | ) | (1,387 | ) | (1,384 | ) | ||||||||||||||||||||||
Other, net | 24 | 12 | 60 | 42 | ||||||||||||||||||||||||||
Income before income taxes | 547 | 194 | 1,837 | 1,250 | ||||||||||||||||||||||||||
Income tax expense | (160 | ) | (377 | ) | (622 | ) | (744 | ) | ||||||||||||||||||||||
Net income (loss) | 387 | (183 | ) | 1,215 | 506 | |||||||||||||||||||||||||
Net income attributable to noncontrolling interests | (14 | ) | (5 | ) | (26 | ) | (7 | ) | ||||||||||||||||||||||
Net income (loss) attributable to Kinder Morgan, Inc. | 373 | (188 | ) | 1,189 | 499 | |||||||||||||||||||||||||
Preferred stock dividends | (39 | ) | (39 | ) | (117 | ) | (117 | ) | ||||||||||||||||||||||
Net income (loss) available to common stockholders | $ | 334 | $ | (227 | ) | $ | 1,072 | $ | 382 | |||||||||||||||||||||
Class P Shares | ||||||||||||||||||||||||||||||
Basic and diluted earnings (loss) per common share | $ | 0.15 | $ | (0.10 | ) | $ | 0.48 | $ | 0.17 | |||||||||||||||||||||
Basic and diluted weighted average common shares outstanding | 2,231 | 2,230 | 2,230 | 2,229 | ||||||||||||||||||||||||||
Declared dividend per common share | $ | 0.125 | $ | 0.125 | $ | 0.375 | $ | 0.375 | ||||||||||||||||||||||
Adjusted earnings per common share (1) | $ | 0.15 | $ | 0.15 | $ | 0.45 | $ | 0.48 | ||||||||||||||||||||||
Segment EBDA |
% change |
% change |
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Natural Gas Pipelines | $ | 884 | $ | 542 | 63 | % | $ | 2,846 | $ | 2,503 | 14 | % | ||||||||||||||||||
CO2 | 197 | 217 | (9 | )% | 636 | 608 | 5 | % | ||||||||||||||||||||||
Terminals | 314 | 294 | 7 | % | 925 | 856 | 8 | % | ||||||||||||||||||||||
Products Pipelines | 302 | 292 | 3 | % | 913 | 761 | 20 | % | ||||||||||||||||||||||
Kinder Morgan Canada | 50 | 48 | 4 | % | 136 | 140 | (3 | )% | ||||||||||||||||||||||
Total Segment EBDA | $ | 1,747 | $ | 1,393 | 25 | % | $ | 5,456 | $ | 4,868 | 12 | % | ||||||||||||||||||
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. |
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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 September 30, |
Nine Months Ended September 30, |
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2017 | 2016 |
% change |
2017 | 2016 |
% change |
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Segment EBDA before certain items (1) | ||||||||||||||||||||||||||||||
Natural Gas Pipelines | $ | 928 | $ | 959 | (3 | )% | $ | 2,852 | $ | 3,050 | (6 | )% | ||||||||||||||||||
CO2 | 217 | 229 | (5 | )% | 659 | 681 | (3 | )% | ||||||||||||||||||||||
Terminals | 296 | 293 | 1 | % | 897 | 864 | 4 | % | ||||||||||||||||||||||
Product Pipelines | 302 | 293 | 3 | % | 879 | 873 | 1 | % | ||||||||||||||||||||||
Kinder Morgan Canada | 50 | 48 | 4 | % | 136 | 140 | (3 | )% | ||||||||||||||||||||||
Subtotal | 1,793 | 1,822 | (2 | )% | 5,423 | 5,608 | (3 | )% | ||||||||||||||||||||||
DD&A and amortization of excess investments | (577 | ) | (564 | ) | (1,742 | ) | (1,697 | ) | ||||||||||||||||||||||
General and administrative and corporate charges (1) (2) | (159 | ) | (163 | ) | (482 | ) | (513 | ) | ||||||||||||||||||||||
Interest, net (1) | (463 | ) | (503 | ) | (1,408 | ) | (1,524 | ) | ||||||||||||||||||||||
Subtotal | 594 | 592 | 1,791 | 1,874 | ||||||||||||||||||||||||||
Book taxes (1) | (213 | ) | (205 | ) | (646 | ) | (674 | ) | ||||||||||||||||||||||
Certain items | ||||||||||||||||||||||||||||||
Acquisition and divestiture related costs | — | (4 | ) | (7 | ) | (12 | ) | |||||||||||||||||||||||
Pension plan net benefit | — | — | — | — | ||||||||||||||||||||||||||
Fair value amortization | 8 | 53 | 42 | 106 | ||||||||||||||||||||||||||
Contract and debt early termination (3) | (7 | ) | 14 | 19 | 53 | |||||||||||||||||||||||||
Legal and environmental reserves (4) | 11 | 1 | 43 | (55 | ) | |||||||||||||||||||||||||
Change in fair market value of derivative contracts (5) | (32 | ) | (30 | ) | (27 | ) | (23 | ) | ||||||||||||||||||||||
Losses on impairments and divestitures, net | (7 | ) | (426 | ) | (13 | ) | (505 | ) | ||||||||||||||||||||||
Project write-offs (6) | — | — | — | (170 | ) | |||||||||||||||||||||||||
Hurricane losses | (9 | ) | — | (9 | ) | — | ||||||||||||||||||||||||
Other | (11 | ) | (6 | ) | (2 | ) | (18 | ) | ||||||||||||||||||||||
Subtotal certain items before tax | (47 | ) | (398 | ) | 46 | (624 | ) | |||||||||||||||||||||||
Book tax certain items (7) | 53 | (172 | ) | 24 | (70 | ) | ||||||||||||||||||||||||
Total certain items | 6 | (570 | ) | 70 | (694 | ) | ||||||||||||||||||||||||
Net income (loss) | 387 | (183 | ) | 1,215 | 506 | |||||||||||||||||||||||||
Net income attributable to noncontrolling interests | (14 | ) | (5 | ) | (26 | ) | (7 | ) | ||||||||||||||||||||||
Preferred stock dividends | (39 | ) | (39 | ) | (117 | ) | (117 | ) | ||||||||||||||||||||||
Net income (loss) available to common stockholders | $ | 334 | $ | (227 | ) | $ | 1,072 | $ | 382 | |||||||||||||||||||||
Net income (loss) available to common stockholders | $ | 334 | $ | (227 | ) | $ | 1,072 | $ | 382 | |||||||||||||||||||||
Total certain items | (6 | ) | 570 | (70 | ) | 694 | ||||||||||||||||||||||||
Noncontrolling interests certain item (8) | — | — | 1 | (9 | ) | |||||||||||||||||||||||||
Adjusted earnings | 328 | 343 | 1,003 | 1,067 | ||||||||||||||||||||||||||
DD&A and amortization of excess investments (9) | 661 | 653 | 2,018 | 1,961 | ||||||||||||||||||||||||||
Total book taxes (10) | 244 | 230 | 730 | 745 | ||||||||||||||||||||||||||
Cash taxes (11) | (9 | ) | (22 | ) | (54 | ) | (61 | ) | ||||||||||||||||||||||
Other items (12) | (13 | ) | 11 | 11 | 31 | |||||||||||||||||||||||||
Sustaining capital expenditures (13) | (156 | ) | (134 | ) | (416 | ) | (379 | ) | ||||||||||||||||||||||
DCF | $ | 1,055 | $ | 1,081 | $ | 3,292 | $ | 3,364 | ||||||||||||||||||||||
Weighted average common shares outstanding for dividends (14) | 2,241 | 2,239 | 2,240 | 2,237 | ||||||||||||||||||||||||||
DCF per common share | $ | 0.47 | $ | 0.48 | $ | 1.47 | $ | 1.50 | ||||||||||||||||||||||
Declared dividend per common share | $ | 0.125 | $ | 0.125 | $ | 0.375 | $ | 0.375 | ||||||||||||||||||||||
Adjusted EBITDA (15) | $ | 1,754 | $ | 1,768 | $ | 5,302 | $ | 5,413 |
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Notes ($ million) |
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(1) |
Excludes certain items: 3Q 2017 - Natural Gas Pipelines $(44), CO2 $(20), Terminals $18, general and administrative and corporate charges $(5), interest expense $4, book tax $53. 3Q 2016 - Natural Gas Pipelines $(417), CO2 $(12), Terminals $1, Products Pipelines $(1), interest expense $31, book tax $(172). 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. YTD 2016 - Natural Gas Pipelines $(547), CO2 $(73), Terminals $(8), Products Pipelines $(112), general and administrative and corporate charges $(24), interest expense $140, book tax $(70). |
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(2) |
Includes corporate charges: 3Q 2017 - $8 YTD 2017 - $18 YTD 2016 - $12 General and administrative expense is also net of management fee revenues from an equity investee: 3Q 2017 - $(8) 3Q 2016 - $(8) YTD 2017 - $(26) YTD 2016 - $(25) |
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(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, partially offset by an equity investee loss on early termination of debt. |
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(4) | Legal reserve adjustments related to certain litigation and environmental matters. | ||
(5) | Gains or losses are reflected in our DCF when realized. | ||
(6) | YTD 2016 includes $106 million of project write-offs associated with our Northeast Energy Direct Market project and $64 million of write-offs associated with our Palmetto project. | ||
(7) |
3Q and YTD 2017 include a $36 million federal return-to-provision tax benefit as a result of the recognition of an enhanced oil recovery credit instead of deduction. 3Q and YTD 2016 include a $276 million book tax expense certain item due to the non-deductibility, for tax purposes, of approximately $800 million of goodwill included in the loss calculation related to the sale of a 50% interest in SNG, resulting in a gain for tax purposes. |
||
(8) | Represents noncontrolling interest share of certain items. | ||
(9) |
Includes KMI's share of certain equity investees' DD&A, net of the
KML noncontrolling interest's DD&A and consolidating joint venture
partners' share of DD&A: 3Q 2017 - $84 3Q 2016 - $89 YTD 2017 - $276 YTD 2016 - $264 |
||
(10) |
Excludes book tax certain items. Also, includes KMI's share of
taxable equity investees' book tax expense: 3Q 2017 - $31 3Q 2016 - $25 YTD 2017 - $84 YTD 2016 - $71 |
||
(11) |
Includes KMI's share of taxable equity investees' cash taxes: 3Q 2017 - $(9) 3Q 2016 - $(25) YTD 2017 - $(54) YTD 2016 - $(59) |
||
(12) | All periods include non-cash compensation associated with our restricted stock program. 3Q and YTD 2017 also include a pension contribution and the noncontrolling interests portion of KML's book tax. | ||
(13) |
Includes KMI's share of certain equity investees' sustaining capital
expenditures (the same equity investees for which DD&A is added
back): 3Q 2017 - $(29) 3Q 2016 - $(24) YTD 2017 - $(74) YTD 2016 - $(66) |
||
(14) | Includes restricted stock awards that participate in common share dividends. | ||
(15) |
Adjusted EBITDA is net income before certain items, less net income attributable to noncontrolling interests before certain items (excluding KML), plus DD&A (including KMI's share of certain equity investees' DD&A, net of consolidating joint venture partners' share of DD&A), book taxes (including KMI’s share of equity investees’ book tax), and interest expense (before certain items). Adjusted EBITDA is reconciled as follows, with any difference due to rounding: |
||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
Net income (loss) | $ | 387 | $ | (183 | ) | $ | 1,215 | $ | 506 | |||||||||||||||||||
Total certain items | (6 | ) | 570 | (70 | ) | 694 | ||||||||||||||||||||||
Net income attributable to noncontrolling interests before certain items (16) | (3 | ) | (5 | ) | (11 | ) | (16 | ) | ||||||||||||||||||||
DD&A and amortization of excess investments, see notes (9) (17) | 669 | 653 | 2,030 | 1,960 | ||||||||||||||||||||||||
Book taxes, see note (10) | 244 | 230 | 730 | 745 | ||||||||||||||||||||||||
Interest, net, see note (1) | 463 | 503 | 1,408 | 1,524 | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 1,754 | $ | 1,768 | $ | 5,302 | $ | 5,413 | ||||||||||||||||||||
(16) |
Excludes KML noncontrolling interest: 3Q 2017 - $11 YTD 2017 - $14 |
|||||||||||||||||||||||||||
(17) |
Includes the noncontrolling interests portion of KML's DD&A: 3Q 2017 - $9 YTD 2017 - $12 |
|||||||||||||||||||||||||||
Volume Highlights
(historical pro forma for acquired and divested assets) |
|||||||||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
Natural Gas Pipelines | |||||||||||||||||||||||
Transport Volumes (BBtu/d) (1) | 28,879 | 28,144 | 28,796 | 28,162 | |||||||||||||||||||
Sales Volumes (BBtu/d) (2) | 2,181 | 2,438 | 2,329 | 2,350 | |||||||||||||||||||
Gas Gathering Volumes (BBtu/d) (3) | 2,523 | 2,935 | 2,635 | 3,044 | |||||||||||||||||||
Crude/Condensate Gathering Volumes (MBbl/d) (4) | 271 | 270 | 268 | 300 | |||||||||||||||||||
CO2 | |||||||||||||||||||||||
Southwest Colorado Production - Gross (Bcf/d) (5) | 1.23 | 1.20 | 1.29 | 1.18 | |||||||||||||||||||
Southwest Colorado Production - Net (Bcf/d) (5) | 0.57 | 0.62 | 0.62 | 0.60 | |||||||||||||||||||
Sacroc Oil Production - Gross (MBbl/d) (6) | 27.46 | 28.92 | 27.73 | 29.72 | |||||||||||||||||||
Sacroc Oil Production - Net (MBbl/d) (7) | 22.87 | 24.09 | 23.09 | 24.76 | |||||||||||||||||||
Yates Oil Production - Gross (MBbl/d) (6) | 17.08 | 17.85 | 17.45 | 18.52 | |||||||||||||||||||
Yates Oil Production - Net (MBbl/d) (7) | 7.55 | 7.94 | 7.75 | 8.24 | |||||||||||||||||||
Katz, Goldsmith, and Tall Cotton Oil Production - Gross (MBbl/d) (6) | 8.36 | 6.89 | 7.88 | 6.86 | |||||||||||||||||||
Katz, Goldsmith, and Tall Cotton Oil Production - Net (MBbl/d) (7) | 7.09 | 5.84 | 6.67 | 5.78 | |||||||||||||||||||
NGL Sales Volumes (MBbl/d) (8) | 9.62 | 10.55 | 9.88 | 10.26 | |||||||||||||||||||
Realized Weighted Average Oil Price per Bbl (9) | $ | 58.29 | $ | 62.12 | $ | 58.08 | $ | 61.27 | |||||||||||||||
Realized Weighted Average NGL Price per Bbl | $ | 24.79 | $ | 18.03 | $ | 23.92 | $ | 16.42 | |||||||||||||||
Terminals | |||||||||||||||||||||||
Liquids Leasable Capacity (MMBbl) | 85.8 | 84.7 | 85.8 | 84.7 | |||||||||||||||||||
Liquids Utilization % | 93.9 | % | 96.1 | % | 93.9 | % | 96.1 | % | |||||||||||||||
Bulk Transload Tonnage (MMtons) (10) | 15.5 | 15.0 | 44.4 | 41.1 | |||||||||||||||||||
Ethanol (MMBbl) | 17.8 | 17.3 | 51.3 | 48.9 | |||||||||||||||||||
Products Pipelines | |||||||||||||||||||||||
Pacific, Calnev, and CFPL (MMBbl) | |||||||||||||||||||||||
Gasoline (11) | 77.7 | 76.3 | 221.9 | 218.4 | |||||||||||||||||||
Diesel | 28.4 | 28.2 | 80.6 | 80.8 | |||||||||||||||||||
Jet Fuel | 24.7 | 24.7 | 72.3 | 69.8 | |||||||||||||||||||
Sub-Total Refined Product Volumes - excl. Plantation | 130.8 | 129.2 | 374.8 | 369.0 | |||||||||||||||||||
Plantation (MMBbl) (12) | |||||||||||||||||||||||
Gasoline | 20.9 | 21.1 | 62.4 | 62.5 | |||||||||||||||||||
Diesel | 5.0 | 4.7 | 14.2 | 13.9 | |||||||||||||||||||
Jet Fuel | 2.8 | 3.2 | 8.9 | 9.2 | |||||||||||||||||||
Sub-Total Refined Product Volumes - Plantation | 28.7 | 29.0 | 85.5 | 85.6 | |||||||||||||||||||
Total (MMBbl) | |||||||||||||||||||||||
Gasoline (11) | 98.6 | 97.4 | 284.3 | 280.9 | |||||||||||||||||||
Diesel | 33.4 | 32.9 | 94.8 | 94.7 | |||||||||||||||||||
Jet Fuel | 27.5 | 27.9 | 81.2 | 79.0 | |||||||||||||||||||
Total Refined Product Volumes | 159.5 | 158.2 | 460.3 | 454.6 | |||||||||||||||||||
NGLs (MMBbl) (13) | 10.0 | 9.9 | 30.5 | 28.9 | |||||||||||||||||||
Crude and Condensate (MMBbl) (14) | 26.6 | 28.8 | 88.1 | 87.6 | |||||||||||||||||||
Total Delivery Volumes (MMBbl) | 196.1 | 196.9 | 578.9 | 571.1 | |||||||||||||||||||
Ethanol (MMBbl) (15) | 11.1 | 10.9 | 31.7 | 31.7 | |||||||||||||||||||
Trans Mountain (MMBbls - mainline throughput) | 29.3 | 30.7 | 84.4 | 88.1 | |||||||||||||||||||
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, Endeavor, 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 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. | |
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Balance Sheets (Unaudited) (In millions) |
||||||||||||
September 30, | December 31, | |||||||||||
2017 | 2016 | |||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 539 | $ | 684 | ||||||||
Other current assets | 2,074 | 2,545 | ||||||||||
Property, plant and equipment, net | 39,867 | 38,705 | ||||||||||
Investments | 7,484 | 7,027 | ||||||||||
Goodwill | 22,164 | 22,152 | ||||||||||
Deferred charges and other assets | 8,223 | 9,192 | ||||||||||
TOTAL ASSETS | $ | 80,351 | $ | 80,305 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Liabilities | ||||||||||||
Short-term debt | $ | 3,156 | $ | 2,696 | ||||||||
Other current liabilities | 3,018 | 3,228 | ||||||||||
Long-term debt | 33,969 | 36,105 | ||||||||||
Preferred interest in general partner of KMP | 100 | 100 | ||||||||||
Debt fair value adjustments | 1,047 | 1,149 | ||||||||||
Other | 2,537 | 2,225 | ||||||||||
Total liabilities | 43,827 | 45,503 | ||||||||||
Shareholders’ Equity | ||||||||||||
Other shareholders' equity | 35,694 | 35,092 | ||||||||||
Accumulated other comprehensive loss | (469 | ) | (661 | ) | ||||||||
Total KMI equity | 35,225 | 34,431 | ||||||||||
Noncontrolling interests | 1,299 | 371 | ||||||||||
Total shareholders' equity | 36,524 | 34,802 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 80,351 | $ | 80,305 | ||||||||
Net Debt (1) | $ | 36,467 | $ | 38,160 | ||||||||
Net Debt including 50% of KML preferred shares (2) | 36,585 | 38,160 | ||||||||||
Adjusted EBITDA Twelve Months Ended |
||||||||||||
September 30, | December 31, | |||||||||||
Reconciliation of Net Income to Adjusted EBITDA (3) | 2017 | 2016 | ||||||||||
Net income | $ | 1,429 | $ | 721 | ||||||||
Total certain items | 170 | 933 | ||||||||||
Net income attributable to noncontrolling interests before certain items | (16 | ) | (21 | ) | ||||||||
DD&A and amortization of excess investments(4) | 2,685 | 2,617 | ||||||||||
Book taxes | 979 | 993 | ||||||||||
Interest, net | 1,885 | 1,999 | ||||||||||
Adjusted EBITDA | $ | 7,132 | $ | 7,242 | ||||||||
Net Debt including 50% of KML preferred shares to Adjusted EBITDA | 5.1 | 5.3 | ||||||||||
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 $119 million and $(43) million as of September 30, 2017 and December 31, 2016, respectively, as we have entered into swaps to convert that debt to U.S.$. |
|
(2) |
September 30, 2017 amount includes $118 million representing 50% of KML preferred shares which is included in noncontrolling interests. |
|
(3) |
Adjusted EBITDA is net income before certain items, less net income attributable to noncontrolling interests before certain items (excluding KML), plus DD&A (including KMI's share of certain equity investees' DD&A, net of the consolidating joint venture partners' share of DD&A), book taxes (including KMI’s share of equity investees’ book tax), and interest expense (before certain items), with any difference due to rounding. |
|
(4) |
Includes the noncontrolling interests portion of KML's DD&A of $12 million for the twelve months ended September 30, 2017. |
|
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Kinder Morgan, Inc.
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