HOUSTON--(BUSINESS WIRE)--Kinder Morgan, Inc. (NYSE: KMI) today announced its preliminary 2017
financial projections. “The fundamentals of our business remain strong.
We expect to generate $4.46 billion of distributable cash flow for 2017
which continues to provide us great strength and flexibility. We are
also confident in our outlook for growth, largely supported by our $13
billion backlog of energy infrastructure expansion opportunities that
have a high probability of completion over the next few years,” said
Steve Kean, president and CEO. Below is a summary of KMI’s expectations
for 2017:
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Continue to maximize shareholder value, which includes maintaining a
solid investment grade rating and continuing to pursue attractive
return projects and acquisitions. As its backlog of projects continues
to be placed in service, the company expects to generate cash flow in
excess of its investment needs. KMI currently believes the best way to
maximize shareholder value will be to use a significant portion of
that excess cash to increase its dividend. KMI expects to declare
dividends of $0.50 per share in 2017. KMI also expects to provide
guidance on a revised dividend policy in the latter part of 2017, with
a view toward delivering additional value to its shareholders in 2018.
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End 2017 with debt-to-Adjusted EBITDA ratio of 5.4 times, with
expected improvement based on additional proceeds generated by joint
ventures. The company is committed to the continued strengthening of
its investment grade balance sheet and is pursuing select joint
ventures to accelerate that process. KMI’s 2017 budget assumes a joint
venture partner on the company’s TransMountain expansion project and
contributions from that partner to fund its share of expansion
capital, but does not include any potential proceeds in excess of the
partner’s share of expansion capital to recognize the value created in
developing the project to this stage. KMI expects to receive such
proceeds, but did not attempt to quantify them for budget purposes.
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Generate $1.99 per share of distributable cash flow and $7.2 billion
of Adjusted EBITDA, essentially flat to 2016 with contributions from
expansion projects coming into service largely offsetting the full
year effect of the Sept. 1, 2016, sale of a 50 percent interest in
SNG, the year over year decline in realized oil prices in its CO2
segment, lower contributions from certain gathering and processing
assets, and the impact from a rate case on CIG settled during 2016.
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Invest $3.2 billion on expansion projects in 2017 and fund with
excess, internally generated cash flow, with no need to access equity
markets during 2017.
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KMI does not provide budgeted net income attributable to common
stockholders (the GAAP financial measure most directly comparable to
the non-GAAP financial measures distributable cash flow and Adjusted
EBITDA) due to the inherent difficulty and impracticality of
quantifying 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 and Henry Hub natural gas of $53 per barrel
and $3 per MMBtu, respectively, and which were consistent with forward
pricing during the budget process. The vast majority of cash generated
by KMI is fee-based and therefore is not directly exposed to commodity
prices. The primary area where KMI has commodity price sensitivity is in
its CO2 segment, where KMI hedges the majority of its next 12
months of oil production to minimize this sensitivity. For 2017, the
company estimates that every $1 per barrel change in the average WTI
crude oil price impacts distributable cash flow by approximately $6
million and each $0.10 per MMBtu change in the price of natural gas
impacts distributable cash flow by approximately $1 million.
The KMI board of directors will review the 2017 budget for approval at
the January board meeting and the budget will be discussed in detail by
management during the company’s annual analyst meeting to be held on
Jan. 25, 2017, in Houston, Texas. Kinder Morgan remains committed to
transparency and will continue to publish its budget on the company’s
website, www.kindermorgan.com.
The 2017 budget will be the standard by which KMI measures its
performance next year and will be a factor in determining employee
compensation.
Kinder Morgan, Inc. (NYSE: KMI) is the largest energy infrastructure
company in America. It owns an interest in or operates approximately
84,000 miles of pipelines and approximately 180 terminals. KMI’s
pipelines transport natural gas, gasoline, crude oil, CO2 and other
products, and its terminals store petroleum products and chemicals, and
handle bulk materials like coal and petroleum coke. For more information
please visit www.kindermorgan.com.
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 and net income before interest expense, taxes, depreciation,
depletion, amortization and amortization of cost of equity investments
and certain items (Adjusted EBITDA) 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. DCF per share is DCF divided by average outstanding
shares, including restricted stock awards that participate in dividends.
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 available to common
stockholders. 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 and book taxes.
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 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 Kinder Morgan 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 Kinder Morgan’s reports filed with the Securities and Exchange
Commission (SEC), including its Annual Report on Form 10-K for the
year-ended December 31, 2015 (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, Kinder Morgan 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.