Kinder Morgan Announces 2019 Financial Expectations

Monday, December 3, 2018 4:05 pm EST

Dateline:

HOUSTON

Public Company Information:

NYSE:
KMI
US49456B1017
"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"

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.

Contact:

Dave Conover
Media Relations
(713) 420-6397
newsroom@kindermorgan.com

Investor Relations
(800) 348-7320
km_ir@kindermorgan.com
www.kindermorgan.com

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