Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Q4 2023 Earnings Presentation
45 slides from Kinder Morgan's earnings presentation, Jan 17, 2024
Slide 1: Investor Presentation 4Q 2023 – December Update
INVESTOR PRESENTATION 4Q 2023 – December Update TransColorado Pipeline compressor station, Mancos, Colorado
Slide 2: Disclosure
Disclosure Forward-looking statements / non-GAAP financial measures / industry & market data General – The information contained in this presentation does not purport to be all-inclusive or to contain all information that prospective investors may require. Prospective investors are encouraged to con
Slide 3: 2024 Guidance
2024 Guidance Increased demand for our services driving growth across all segments Variance to Key metrics 2024 Budget 2023 Forecast Net Income attributable $1.21 +11% to KMI / share + Growth projects in-service, primarily in Natural Gas and RNG Adjusted EBITDA $8.0 billion +5% + Contract rate escal
Slide 4: Leader in North American Energy Infrastructure
Leader in North American Energy Infrastructure Energy infrastructure, especially natural gas pipelines & storage, has a decades-long time horizon moving and storing the energy of today and tomorrow Largest natural gas transmission network Delivering energy to improve lives & create a better world —
Slide 5: Strategy
Strategy Maximizing shareholder value Stable, fee-based Invest in a lower Financial Disciplined Enhance assets carbon future flexibility capital allocation shareholder value Core energy Established Energy 4.0x 2023B Conservative Maintain strong infrastructure Transition Ventures expected YE Net assu
Slide 6: Core Holding in Any Portfolio
Core Holding in Any Portfolio Generating significant cash flow & returning value to shareholders >$65 billion Largest energy infrastructure company in >45% of market cap value returned enterprise value the S&P500 to shareholders since 2016 S&P500 CURRENT DIVIDEND YIELDS y-axis represents # of S&P500
Slide 7: Highly-Contracted Cash Flows
Highly-Contracted Cash Flows Stable cash flows with ~67% take-or-pay or hedged earnings CONTRACT MIX OF 2023B TOTAL ADJUSTED SEGMENT EBDA Entitled to payment regardless of throughput Fixed fee collected regardless of commodity price Reservation fee for capacity Volumetric-based revenues Commodity-pr
Slide 8: Proven History of Cash Flow Generation and Shareholder Returns
Proven History of Cash Flow Generation and Shareholder Returns ADJUSTED EBITDA NET DEBT / ADJ. EBITDA DIVIDENDS PAID & ($ billion) SHARES REPURCHASED(a) ($ billion) +18% -23% $17.3 billion returned to shareholders $0.5 $0.4 $7.9 $0.7 $0.5 $7.5 $7.7 $7.1 $7.2 $6.9 $6.5 $6.7 5.3x $0.4 5.1x $2.5 $2.5 $
Slide 9: $3.8bn Committed Growth Capital Project Backlog as of 9/30/2023
$3.8bn Committed Growth Capital Project Backlog as of 9/30/2023 Expect 27% of backlog capital in service in 4Q 2023, 39% in 2024, 27% in 2025, and 7% beyond LOWER $ million TOTAL CARBON Natural Gas (excluding G&P) $2,157 $2,157 79% for end-use, 19% supply-push, 2% CCS Products (excluding G&P) 47 16
Slide 10: $1.815bn Acquisition of NEP's South Texas Natural Gas Pipelines
$1.815bn Acquisition of NEP’s South Texas Natural Gas Pipelines 462 miles of primarily long-haul natural gas pipelines with 4.9 bcfd of transport capacity KMI to acquire NEP’s South Texas assets, STX Midstream – ~8.6x 2024 EBITDA; 7.0-7.5x long-term including commercial synergies(a) – Immediately ac
Slide 11: Growing Demand for Our Natural Gas Transportation & Storage Assets
Growing Demand for Our Natural Gas Transportation & Storage Assets Leading to Increased Value Transport Natural Gas Transport U.S. natural gas demand grew 36% over KM NATURAL GAS TRANSPORT & SALES VOLUMES tbtud the past 7 years, from 78 to 106 bcfd 39.2 39.8 41.0 41.5 35.3 30.8 30.4 31.4 Favorable r
Slide 12: Provide High-Value Natural Gas Takeaway in all Major Basins
Provide High-Value Natural Gas Takeaway in all Major Basins U.S. production expected to grow 22% by 2030 U.S. NATURAL GAS PRODUCTION TGP provides valuable egress for NE producers & serves RELEVANT TO OUR FOOTPRINT bcfd important domestic markets as well as LNG and Mexico 41 Northeast +6 bcfd 35 LNG
Slide 13: Strong Gulf Coast Footprint Positioned to Serve Demand Growth
Strong Gulf Coast Footprint Positioned to Serve Demand Growth >95% of demand growth is expected to occur in Texas & Louisiana, driven by exports & industrial U.S. NATURAL GAS DEMAND bcfd 129 LNG exports 26 106 LNG exports 11 LNG plant fuel 2 LNG plant fuel 1 LNG Terminals Processing/Treatment Plant
Slide 14: Transporter of Choice for LNG Facilities
Transporter of Choice for LNG Facilities due to Supply Diversity, Network Connectivity, & 700 bcf of Total Working Gas Storage U.S. LNG FEEDGAS & KM TRANSPORT POTENTIAL bcfd U.S. LNG Feedgas KM transport contracted to move ~7 bcfd to facilities today & ~10 bcfd by the end of 2025 evaluating ~13 bcfd
Slide 15: Extensive Storage Capabilities & Premium Service Offerings
Extensive Storage Capabilities & Premium Service Offerings Provide Valuable Solutions for Variable Demand from Utilities & Exports Largest storage position in U.S. with 700 bcf of storage Stagecoach provides — ~25% subject to market-based rates; CIG fully contracted for flexibility to serve NE ~4.5-
Slide 16: Serving the Permian's Growing Gas Takeaway Needs
Serving the Permian’s Growing Gas Takeaway Needs Own interest in >7 bcfd of existing Permian takeaway capacity NGPL Highly utilized capacity with long-term contracts Advantaged Intrastates network, downstream of GCX and PHP, provides shippers with end-market optionality (Houston power & petchem, LNG
Slide 17: Products Segment Overview
Products Segment Overview Refined products pipes deliver transportation fuels from refining centers to key demand markets; crude assets in major basins PRODUCTS SEGMENT Refined Products (mbbld) Crude G&P and transport (mbbld) Adjusted Segment EBDA ($mm) 2000 $1,400 1800 $1,200 1600 1400 $1,000 COVID
Slide 18: Products Segment's West Coast Renewable Fuels Projects
Products Segment’s West Coast Renewable Fuels Projects Recently announced commercial in-service of our Southern and Northern California renewable diesel hubs Subsidies & state goals for emissions reductions are driving increased RD volumes Particularly in California where stacked subsidies currently
Slide 19: Terminals Segment Overview
Terminals Segment Overview Refined products focused; providing customers with unmatched scale, service-offerings & market-making connectivity # of capacity ASSET SUMMARY terminals (mmbbls) Terminals segment – Bulk 28 Terminals segment – Liquids 47 78 Products segment 65 56 Total Terminals 140 134 Jo
Slide 20: Industry-Leading Renewable Feedstock Storage & Logistics Offering
Industry-Leading Renewable Feedstock Storage & Logistics Offering Expanding Lower Mississippi River Hub Modifying 30 tanks & enhancing rail, truck, and marine New heated storage capacity and various marine, rail, & capabilities for Neste at Harvey pipeline infrastructure improvements at GRT $80 mill
Slide 21: CO2 Segment Overview
CO2 Segment Overview World class, fully-integrated assets | CO2 source to crude oil production & takeaway in the Permian Basin Interest in 5 oil CO2 pipelines CO2 EOR & TRANSPORT FREE CASH FLOW $ millions FCF Capex Adj. Segment EBDA fields with 9.3 CO2 source fields Oil fields $789 $777 billion barr
Slide 22: Growing RNG Portfolio
Growing RNG Portfolio LANDFILL-RNG ANNUAL PRODUCTION PRIMARILY CONTRACTED IN CAPACITY net to KM GROWTH PLAN TRANSPORTATION MARKET TODAY Potential to grow +0.6 bcf over next decade Long-term contracts in transportation/RIN 4.9 bcf operational (5.4 bcf gross) with little capex market +0.8 bcf expected
Slide 23: Red Cedar Carbon Capture and Sequestration Project
Red Cedar Carbon Capture and Sequestration Project Utilizing KM’s assets and expertise to enable an accretive CCS project Overview CO2 pipelines Oil fields — Red Cedar Gathering (RCG) is a natural gas midstream joint-venture between Southern Ute Indian Tribe Growth Fund (51%) and Kinder Morgan (49%)
Slide 24: ESG Recognition
ESG Recognition Highly rated by multiple agencies FTSE #3 MSCI A Sustainalytics #3 of Oil & Gas Oil & Gas Refining, of 117 Oil & Gas Pipelines subsector Marketing, Transportation Storage & Transportation & & Storage Industry #4 of 203 Refiners & Pipelines Refinitiv #7 SSGA top 10% Moody’s of 232 Oil
Slide 25: Compelling Investment Opportunity
Compelling Investment Opportunity Strategically-positioned assets generating substantial cash flow with attractive investment opportunities NATURAL GAS PRODUCTS TERMINALS CO2 Storage Terminals Terminals CO2 source fields Processing 16 Jones Act tanker Oil fields LNG facilities RNG plants RNG plants
Slide 26: Appendix
APPENDIX Terminal Pit 11, Pasadena, Texas
Slide 27: Energy is Essential to Human & Economic Development
Energy is Essential to Human & Economic Development The transition to a renewable-energy world will not be seamless and will require the ongoing use of hydrocarbons U.S. POPULATION, GDP & ENERGY SUPPLY BY SELECT FUEL TYPES 2022, 2030, 2040, 2050 23% 30% 400 +12% 6% 2040 % mix +15% 372 350 361 5% 346
Slide 28: Energy Transitions Take Time
Energy Transitions Take Time Our assets and services will be needed for a very long time GLOBAL ENERGY MIX BY FUEL PWh Biomass Coal Oil Natural gas Renewables Nuclear % of energy mix 180 – Energy transitions take a long time and consist of adding energy forms, 160 not eliminating existing forms 12%
Slide 29: Stable, Growing U.S. Production
Stable, Growing U.S. Production U.S. NATURAL GAS PRODUCTION U.S. CRUDE PRODUCTION & REFINED PRODUCT SUPPLY bcfd mmbbld Road fuels Crude Jet Fuel 108 15 102 12 96 9 90 Crude production continues to grow Production increases to 104 bcfd by 2025 6 84 Refined product volumes remain stable 3 78 72 - 2018
Slide 30: Natural Gas Gathering & Processing Assets Across Key Basins
Natural Gas Gathering & Processing Assets Across Key Basins Volume recovery ongoing G&P BUSINESS AS % OF 2023B NATURAL GAS SEGMENT GATHERING SHORT-TERM PRODUCTION OUTLOOK TOTAL ADJ. SEGMENT EBDA VOLUMES bbtud dry gas, bcfd, 2019 – 2024 4,000 2024 +67% over 2% Haynesville pre-COVID levels KinderHawk
Slide 31: Refined Products Volumes Continue to Recover
Refined Products Volumes Continue to Recover GASOLINE mbbld DIESEL mbbld JET FUEL mbbld 2022 2023B 2023 2022 2023B 2023 2022 2023B 2023 1,200 1,200 1,200 1,000 1,000 1,000 800 800 800 600 600 600 400 400 400 200 200 200 - - - 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Q3’23: 1,002 mbbld 362 mbbld 292 mbbld
Slide 32: Energy Transition Ventures (ETV) Group
Energy Transition Ventures (ETV) Group The group is evaluating commercial opportunities ETV Group focused on opportunities emerging from the lower carbon energy transition outside of our existing asset base Other business segments will continue to pursue their own energy transition opportunities on
Slide 33: RNG Market Opportunity
RNG Market Opportunity U.S. RNG PRODUCTION bcfd RNG DEMAND MARKETS 3.7 transportation market voluntary market RNG-based vehicles If RNG volumes are Parties interested in expect landfills to drive growth emit up to 75% less consumed by fleets voluntarily decarbonizing 3.2 GHG emissions than in the tr
Slide 34: Contract Strategy Insulates Cash Flow Through Commodity Cycles
Contract Strategy Insulates Cash Flow Through Commodity Cycles Structure long-term contracts that minimize price & volume volatility 67% take or-pay or 26% fee- hedged based 7% Avg. remaining 2023B Total Adjusted Volumes & price are Price is fixed, Commodity- contract life Segment EBDA: contractuall
Slide 35: Minimum Book Tax Detail
Minimum Book Tax Detail High-level example of calculation Net income Add back: Book depreciation Add back: Book federal income tax Subtract: Tax depreciation 2022 budgeted tax depreciation of ~$5.2 billion Adjusted Financial Statement Income (AFSI) x 15% Minimum Book Tax (MBT) PayPay the the greater
Slide 36: 2023 Budget
2023 Budget Variance to Key metrics 2023 Budget 2022 Net income $2.5 billion -1% Adjusted EBITDA $7.7 billion +2% Distributable Cash Flow $4.8 billion -3% (DCF) Discretionary capital(a) $2.1 billion +$0.4 billion Dividend / share $1.13 +2% ~$770 million budgeted capacity available for attractive Yea
Slide 37: Non-GAAP Financial Measures & Reconciliations
NON-GAAP FINANCIAL MEASURES & RECONCILIATIONS Elba liquefaction, Elba Island, Georgia
Slide 38: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures Our non-GAAP financial measures described 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 meas
Slide 39: Use of Non-GAAP Financial Measures (Continued)
Use of Non-GAAP Financial Measures (Continued) 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” a
Slide 40: Net Income & DCF
Net Income & DCF $ in millions 2024 2023 Budget Forecast Net income attributable to Kinder Morgan, Inc. (GAAP) $ 2,700 $ 2,500 Total Certain Items (a) — — DD&A and amortization of excess cost of equity investments 2,400 2,300 Income tax expense(b) 800 700 Cash taxes (a) — — Sustaining capital expend
Slide 41: Net Income & Adjusted EBITDA
Net Income & Adjusted EBITDA $ in millions 2024 2023 Budget Forecast Net income attributable to Kinder Morgan, Inc. (GAAP) $ 2,700 $ 2,500 Total Certain Items (a) — — DD&A and amortization of excess cost of equity investments 2,400 2,300 Income tax expense(b) 800 700 Interest, net (b) 1,800 1,800 Am
Slide 42: GAAP Reconciliations
GAAP Reconciliations $ in millions Certain Items 2022 Fair value amortization $ (15) Legal, environmental and other reserves 51 Change in fair value of derivative contracts (a) 57 Income tax Certain Items (b) (37) Other 32 Total Certain Items (c,d) $ 88 2022 2023 Reconciliation of Segment EBDA to Ad
Slide 43: Reconciliations of KMI FCF & CO2 Segment FCF
Reconciliations of KMI FCF & CO2 Segment FCF $ in millions Reconciliation of KMI FCF 2018 2019 2020 2021 2022 CFFO $ 5,043 $ 4,748 $ 4,550 $ 5,708 $ 4,967 Capital expenditures (a) (2,904) (2,270) (1,707) (1,281) (1,621) FCF 2,139 2,478 2,843 4,427 3,346 Dividends paid(b) (1,774) (2,163) (2,362) (2,4
Slide 44: Reconciliation of Adjusted EBITDA, Normalized for Divestitures
Reconciliation of Adjusted EBITDA, Normalized for Divestitures $ in millions Reconciliation of Adjusted EBITDA, Normalized for Divestitures 2016 2017 2018 2019 2020 2021 2022 Net income attributable to Kinder Morgan, Inc. $ 708 $ 183 $ 1,609 $ 2,190 $ 119 $ 1,784 $ 2,548 Noncontrolling interest cert
Slide 45: Reconciliation of Net Debt
Reconciliation of Net Debt $ in millions Reconciliation of Net Debt 2016 2017 2018 2019 2020 2021 2022 Current portion of debt $ 2,696 $ 2,828 $ 3,388 $ 2,377 $ 2,558 $ 2,646 $ 3,385 Total long-term debt 37,354 35,015 33,936 31,915 32,131 30,674 28,403 Debt fair value adjustments (1,149) (927) (731)