$1.13 dividend per share; $1.12 net income attributable to KMI per share; and $7.7 billion Adjusted EBITDA
HOUSTON, December 07, 2022--(BUSINESS WIRE)--Kinder Morgan, Inc. (NYSE: KMI) today announced its preliminary 2023 financial projections. "We expect 2023 to be another very good year for Kinder Morgan, with strong market fundamentals, continued robust growth in demand for existing and expanded natural gas transportation, storage, and gathering and processing; and continued demand for refined products midstream services and investments in our Energy Transition Ventures business," said Steve Kean, KMI Chief Executive Officer. "Those results will be offset by the higher interest rate environment we expect in 2023. We anticipate generating net income attributable to KMI per share of $1.12, flat to our year-end 2022 forecast of $1.12 per share, with Adjusted EBITDA up 3% from 2022 at $7.7 billion, compared to the 2022 forecast of $7.5 billion. We anticipate total segment EBDA of $8.2 billion, up 5% compared to the 2022 forecast. We also expect to end 2023 with a Net Debt-to-Adjusted EBITDA ratio of 4.0 times, well below our long-term target of 4.5 times."
"We expect distributable cash flow (DCF) per share of $2.13, down from our 2022 forecast of $2.17 DCF per share. We project interest expense to be significantly higher than our 2022 forecast, representing a DCF impact of approximately $0.15 per share. Absent that impact, expected DCF per share would be up 5% year over year," said Kimberly Dang, KMI President. "Over the long-term, our corporate strategy of maintaining a portion (~25%) of our debt at a floating rate has been sound, saving the company approximately $1.2 billion over the last 10 years, far exceeding the expected 2023 impact."
Below is a summary of KMI’s expectations for 2023:
Generate $1.12 of net income attributable to KMI per share, flat to our current 2022 forecast of $1.12.
Generate $2.13 DCF per share, down 1% from the current forecast for 2022 due to the impact of the projected increased interest expense discussed above.
Generate $7.7 billion of Adjusted EBITDA, up 3% from the 2022 forecast; and total segment EBDA of $8.2 billion, up 5% from the 2022 forecast.
Invest $2.1 billion in expansion projects and contributions to joint ventures, or discretionary capital expenditures (of which roughly 80% is in lower carbon projects).
Return additional value to shareholders in 2023 through an anticipated $1.13 per share dividend (annualized) and opportunistic share repurchases.
End 2023 with a Net Debt-to-Adjusted EBITDA ratio of 4.0 times, well below our long-term target of approximately 4.5 times.
The expected $2.13 of DCF per share and the 4.0 times leverage metric do not reflect the impact of possible opportunistic share repurchases, which KMI will have substantial capacity to transact on.
Please see "Non-GAAP Financial Measures" below for definitions of DCF, Adjusted EBITDA and Net Debt, and the accompanying tables for reconciliations of 2023 budgeted net income attributable to KMI to budgeted DCF and budgeted Adjusted EBITDA.
KMI’s expectations assume average annual prices for West Texas Intermediate (WTI) crude oil and Henry Hub natural gas of $85 per barrel and $5.50 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 2023, the company estimates that every $1 per barrel change in the average WTI crude oil price impacts DCF by approximately $9.1 million and each $0.10 per MMBtu change in the price of natural gas impacts DCF by approximately $1.3 million.
The KMI board of directors has preliminarily reviewed the 2023 budget and will take formal action on it at the January board meeting. Management will discuss the budget in detail during the company’s annual investor day conference on January 25, 2023, in Houston, Texas. The 2023 budget will be the standard by which KMI measures its performance next year and will be a factor in determining employee compensation. Kinder Morgan remains committed to transparency and will continue to publish its budget on the company’s website as presented at the investor day conference. An investor presentation updated with a brief overview of the 2023 budget has been posted to the Investor Relations page of KMI’s website.
About Kinder Morgan, Inc.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy infrastructure companies in North America. Access to reliable, affordable energy is a critical component for improving lives around the world. We are committed to providing energy transportation and storage services in a safe, efficient and environmentally responsible manner for the benefit of the people, communities and businesses we serve. We own an interest in or operate approximately 83,000 miles of pipelines, 141 terminals, 700 billion cubic feet of working natural gas storage capacity and have renewable natural gas generation capacity of approximately 2.2 Bcf per year of gross production with an additional 5.2 Bcf in development. Our pipelines transport natural gas, refined petroleum products, renewable fuels, crude oil, condensate, CO2 and other products, and our terminals store and handle various commodities including gasoline, diesel fuel, renewable fuel feedstocks, chemicals, ethanol, metals and petroleum coke. Learn more about our renewables initiatives on the low carbon solutions page at www.kindermorgan.com.
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 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 in this news release include express or implied statements pertaining to KMI’s expectations for 2022 and 2023, including expected net income attributable to Kinder Morgan, Inc., DCF (in each case in the aggregate and per share), total segment EBDA, Adjusted EBITDA, Net Debt-to-Adjusted EBITDA ratios, anticipated dividends and discretionary capital expenditures, and KMI’s financing strategy, including use of floating-rate debt. 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 as to when or if any such forward-looking statements will materialize nor their ultimate impact on our operations or financial condition. Important factors that could cause actual results to differ materially from those expressed in or implied by these forward-looking statements include: the timing and extent of changes in the supply of and demand for the products we transport and handle; commodity prices; and the other 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, 2021 (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.
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; Adjusted EBITDA; and Net Debt are presented herein.
Our non-GAAP financial measures described further below should not be considered alternatives to GAAP net income attributable to Kinder Morgan, Inc. or other GAAP measures and have important limitations as analytical tools. Our computations of these non-GAAP financial measures may differ from similarly titled measures used by others. You should not consider these non-GAAP financial measures in isolation or as substitutes for an analysis of our results as reported under GAAP. Management compensates for the limitations of these non-GAAP financial 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.
Certain Items, as adjustments used to calculate our non-GAAP financial measures, are items that are required by GAAP to be reflected in net income attributable to Kinder Morgan, Inc., 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). We also include adjustments related to joint ventures (see "Amounts from Joint Ventures" below).
DCF is calculated by adjusting net income attributable to Kinder Morgan, Inc. for Certain Items, and further by DD&A, amortization of excess cost of equity investments, income tax expense, cash taxes, sustaining capital expenditures and other items. We also include amounts from joint ventures for income taxes, DD&A and sustaining capital expenditures (see "Amounts from Joint Ventures" below). DCF is a significant performance measure useful to management and external users of our financial statements in evaluating our performance and in measuring and estimating the ability of our assets to generate cash earnings after servicing our debt, paying cash taxes and expending sustaining capital, that could be used for discretionary purposes such as dividends, stock repurchases, retirement of debt, or expansion capital expenditures. DCF should not be used as an alternative to net cash provided by operating activities computed under GAAP. We believe the GAAP measure most directly comparable to DCF is net income attributable to Kinder Morgan, Inc. 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 attributable to Kinder Morgan, Inc. before interest expense, income taxes, DD&A, and amortization of excess cost of equity investments (EBITDA) for Certain Items. We also include amounts from joint ventures for income taxes and DD&A (see "Amounts from Joint Ventures" below). Adjusted EBITDA is used by management and external users, in conjunction with our Net Debt (as described further below), 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 attributable to Kinder Morgan, Inc.
Net Debt is calculated by subtracting from debt (1) cash and cash equivalents, (2) debt fair value adjustments, and (3) the foreign exchange impact on Euro-denominated bonds for which we have entered into currency swaps. Net Debt is a non-GAAP financial measure that management believes is useful to investors and other users of our financial information in evaluating our leverage. We believe the most comparable measure to Net Debt is debt net of cash and cash equivalents.
Amounts from Joint Ventures - Certain Items, DCF and Adjusted EBITDA reflect amounts from unconsolidated joint ventures (JVs) and consolidated JVs utilizing the same recognition and measurement methods used to record "Earnings from equity investments" and "Noncontrolling interests," respectively. The calculations of DCF and Adjusted EBITDA related to our unconsolidated and consolidated JVs include the same items (DD&A and income tax expense, and for DCF only, also cash taxes and sustaining capital expenditures) with respect to the JVs as those included in the calculations of DCF and Adjusted EBITDA for our wholly-owned consolidated subsidiaries. Although these amounts related to our unconsolidated JVs are included in the calculations of DCF and Adjusted EBITDA, such inclusion should not be understood to imply that we have control over the operations and resulting revenues, expenses or cash flows of such unconsolidated JVs.
Kinder Morgan, Inc. and Subsidiaries
Reconciliation of Projected Net Income Attributable to Kinder Morgan, Inc. to Projected DCF
(In billions, unaudited)
Net income attributable to Kinder Morgan, Inc. (GAAP)
Total Certain Items (1)
DD&A and amortization of excess cost of equity investments for DCF (2)
Income tax expense for DCF (2)(3)
Cash taxes (2)
Sustaining capital expenditures (2)
Other items (4)
Kinder Morgan, Inc. and Subsidiaries
Reconciliation of Projected Net Income Attributable to Kinder Morgan, Inc. to Projected Adjusted
(In billions, unaudited)
Net income attributable to Kinder Morgan, Inc. (GAAP)
Total Certain Items (1)
DD&A and amortization of excess cost of equity investments
Income tax expense (3)
JV DD&A and income tax expense (2)
Interest, net (3)
Aggregate adjustments for Total Certain Items are currently estimated to be less than $100 million.
Includes or represents DD&A, income tax expense, cash taxes and/or sustaining capital expenditures (as applicable for each item) from JVs.
Amounts are adjusted for Certain Items.
Includes pension contributions, non-cash pension expense and non-cash compensation associated with our restricted stock program.
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