HOUSTON--(BUSINESS WIRE)--Kinder Morgan, Inc. (NYSE: KMI) today announced its preliminary 2019
financial projections. “This year has been a very good one for Kinder
Morgan and we expect to nicely exceed our budget. In 2019, with our
market fundamentals remaining very strong, the Elba Liquefaction Project
coming online and Gulf Coast Express entering service, we project
continued growth,” said Steve Kean, KMI chief executive officer. “We
expect to generate $5.0 billion of distributable cash flow (DCF) which
is approximately a 10 percent increase over our 2018 budgeted DCF. Our
growth will continue to be supported by an approximately $6.5 billion
backlog of high probability energy infrastructure expansion
opportunities,” continued Kean.
Below is a summary of KMI’s expectations for 2019:
-
Generate $2.20 DCF per share and $7.8 billion of Adjusted EBITDA, up 7
percent and 4 percent, respectively, compared to our 2018 budget,
despite the sale of our Trans Mountain asset.
-
Return additional value to shareholders in 2019 through the previously
announced dividend increase. As first stated in KMI’s second quarter
2017 earnings release, KMI expects to increase the declared dividend
per common share for 2019 to $1.00 per share (annualized), beginning
with $0.25 per share for the Q1 2019 dividend (which is paid in Q2
2019), a 25 percent increase from the 2018 dividend and a 100 percent
increase from the 2017 dividend. KMI also continues to expect to
increase the dividend to $1.25 per share (annualized) for 2020.
-
Invest $3.1 billion in expansion projects and contributions to joint
ventures in 2019. KMI expects to use internally generated cash flow to
fully fund its 2019 dividend payment as well as the vast majority of
its 2019 discretionary spending, with no need to access equity markets.
-
End 2019 with a Net Debt-to-Adjusted EBITDA ratio of 4.5 times. We
continue to be well positioned for an upgrade to our credit ratings
and are on positive outlook at all three rating agencies.
KMI does not provide budgeted net income attributable to common
stockholders and net income, the GAAP financial measures most directly
comparable to the non-GAAP financial measures DCF and Adjusted EBITDA,
respectively, due to the impracticality of quantifying certain
components required by GAAP such as: ineffectiveness of 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 $60.00 per
barrel and $3.15 per MMBtu, respectively, 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 2019, the
company estimates that every $1 per barrel change in the average WTI
crude oil price impacts DCF by approximately $9 million and each $0.10
per MMBtu change in the price of natural gas impacts DCF by
approximately $1 million.
The KMI board of directors will review the 2019 budget for approval at
the January board meeting and management will discuss the budget in
detail during the company’s annual analyst conference on Jan. 23, 2019,
in Houston, Texas. Kinder Morgan remains committed to transparency and
will continue to publish its budget on the company’s website as
presented at the analyst conference. The 2019 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 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.
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, net income before interest expense, taxes, DD&A and Certain Items
(Adjusted EBITDA) 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. DCF per share is DCF divided by average
outstanding shares, including restricted stock awards that participate
in dividends.
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. 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.
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 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.