Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — 2003 Analyst Conference
33 slides from Kinder Morgan's conference presentation, Jan 22, 2003
Slide 1: CO2 Pipelines
KINDER’ MORGAN CO, Pipelines Tim Bradley
Slide 2: CO2 In Action
CO2 In Action Click here to view ‘CO2 in Action’ mpg movie 2
Slide 3: CO2 Pipelines Segment Overview
CO2 Pipelines Segment Overview (a) CO2 Contribution to 2003 KMP Estimated breakout of CO2 DCF Segment DCF Natural Other CO2 Gas Flood Pipelines Properties 30% 10% SACROC CO 2 CO2 45% Products Pipelines Pipelines Deliveries 36% 15% 37% Related Terminals SACROC 19% 8% (a) 2003 budgeted distributable c
Slide 4: Comparison of 2001, 2002, 2003 – Distributable Cash
Comparison of 2001, 2002, 2003 – Distributable Cash CO2 Sales and Transportation business remains flat CO2 Flood Development Opportunities are growing MM$ $200 $150 CO2 Flood Properties $100 CO2 S&T $50 $0 2001 2002 2002 2003 Actual Plan Actual Plan 4
Slide 5: Kinder Morgan CO2 Operations
Kinder Morgan CO2 Operations CO2 Company Remaining Reserves Ownership Location Deliverability Operator McElmo Dome 45% SW Colorado 40+ years KM Utah Colorado Bravo Dome 11% NE New Mexico 14 years Oxy McElmo Dome Kansas Company Capacity Pipelines Ownership Location (MMcf/d) Operator Bravo Dome Cortez
Slide 6: KM CO2 Company Mission
KM CO2 Company Mission: We turn CO2 into money Crude Oil Carbon Dioxide Results 6
Slide 7: How CO2 Works
How CO2 Works • CO2 mixes with oil much like turpentine cleans paint from a brush • Inter-phase mass transfer typically yields NGL rich gas production • Chase water injection helps control mobility and gas recycle 7
Slide 8: Permian Basin CO2 Purchases and Oil Production
Permian Basin CO2 Purchases and Oil Production Oil Production - MBOPD CO2 Deliveries - BCFD 200 150 1.50 100 1.25 50 Cum: 717 MMB 0 1.00 Permian Basin Consumption 1980 1985 1990 1995 2000 Cum: 7.3 TCF CO2 Flood Production % of Permian 0.75 18 16 0.50 14 12 10 0.25 McElmo Dome Deliveries 8 Cum: 3.8 T
Slide 9: Industry Consumption
Industry Consumption Seventeen oil field operators in the Permian Basin utilize CO2 in more than 50 projects Other Hess ChevTex BP Oxy KM CO2 ExxonMobil 9
Slide 10: Permian Basin Market Share
Permian Basin Market Share McElmo Dome is the premier source – Market Share continues to grow Kinder Morgan remains the leading supplier 2002 Deliveries MMcf/d Others 7.8% 1600 1400 1200 1000 Oxy 20.9% KM 37.5% 800 600 400 McElmo Dome 65% E/M 33.9% 200 0 1984 1988 1992 1996 2000 McElmo Dome Bravo Do
Slide 11: Kinder Morgan CO2 Deliveries
Kinder Morgan CO2 Deliveries SACROC deliveries are an increasing percent of Kinder Morgan CO2 deliveries Customer Base 2002 – 398 MMCF/d Customer Base 2003 – 562 MMCF/d Other Other BP BP SACROC Hess Hess SACROC ChevTex ChevTex OXY OXY New projects total 64 MMCF/d (11%) 11
Slide 12: CO2 Flooding and MLP Attributes
CO2 Flooding and MLP Attributes Investment Characteristics: Primarily Hard Assets - Pipelines, Compression Equipment, Wells Operating Cost Structure: Predictable – Driven by fluid handling, purchased power Revenue Stream: CO2 Floods are typically 20-30 year projects Production is usually stable and
Slide 13: SACROC Development History
SACROC Development History Daily Oil Production 1948-2000 250,000 1948 – Discovered. Primary production quickly followed by centerline waterflood for pressure support. 200,000 150,000 1972 - CO2 Injection began - Small volumes injected; not a concentrated effort 100,000 1994 - Pennzoil initiated ext
Slide 14: SACROC CO2 Flood Projects
SACROC CO2 Flood Projects Different Approaches, Different Results Previous Operator’s Project Kinder Morgan’s Project 220 MMCF/d Injection 220 MMCF/d Injection 14
Slide 15: SACROC Long Term Potential
SACROC Long Term Potential Daily Oil Production 1980-2010 100,000 Pre-2000 - Cumulative oil production 1.25 Billion barrels, 75,000 44.5 % OOIP, Production 8500 BOPD 50,000 2002 - Announced CLPL, accelerated development program. 25,000 - Average oil production 13,000 BOPD 0 - Average CO2 injection 2
Slide 16: SACROC CO2 Flood Asset Attributes
SACROC CO2 Flood Asset Attributes SACROC Unit has many attractive features: 1. Reservoir thickness reduces well/field facilities investment 2. Prolific reservoir, high permeability accelerates returns 3. Second largest unit in Permian Basin – 2.7 Billion OOIP 4. Field is under-developed relative to
Slide 17: So…Where's the Beef? Risks
SACROC CO2 Flood – So…Where’s the Beef? What are the Risks: 1. Conventional E&P risks not applicable – source, trap, reservoir, economic size have all been established. Technology/process is mature. 2. Margin Risks: • Revenue: Volumes and Price • Costs: Capex, Opex, CO2 Purchases • Capex: Drilling/C
Slide 18: Future SACROC Development Economics
Future SACROC Development Economics - Projects are resilient in low price environment Cost/BOE Projected IRRs (CO2 Cost @ contract price) Existing Infrastructure Accelerated Case CL IV Stepout CO2 $2.95 100% Opex $4.88 80% Wells, Facilities 60% $1.89 40% 20% Total: $9.72 0% $10 $15 $20 $25 $30 Basis
Slide 19: SACROC CO2 Flood – Revenue Risk Assessment
SACROC CO2 Flood – Revenue Risk Assessment Incremental Recovery, % OOIP Ref: Netherland Sewell Volume: 16% 14% 1. Oil Reserves and production 12% expectations are conservative 10% 8% when compared to mature 6% Permian Basin CO2 Floods. 4% Netherland Sewell proved 2% 0% reserves estimate is >98% of A
Slide 20: SACROC CO2 Flood – Revenue Risk Assessment (Price)
SACROC CO2 Flood – Revenue Risk Assessment Price: Bbl/d 25000 KM share net production, approved projects only (a) 20000 1. Hedging program has locked 15000 $22.02 $22.96 Existing Hedges in >50% of production 10000 $22.76 expected from approved $21.80 $22.77 $22.75 5000 projects in next 5 years at ~
Slide 21: Impact of Oil Price/Volume Variance
Impact of Oil Price/Volume Variance on SACROC 2003 DCF Change in Unhedged Oil Price (a) Oil Price: -2 $/B -1 $/B Base + 1 $/B +2 $/B Production + 10% +8.4 MM$ +10.1 MM$ +11.8 MM$ +13.4 MM$ +15.1 MM$ Production + 5% +3.0 MM$ +4.4 MM$ +5.9 MM$ +7.3 MM$ +8.7 MM$ 2003 Plan -2.4 MM$ -1.2 MM$ +1.2 MM$ +2.
Slide 22: So…Where's the Beef? Risks
SACROC CO2 Flood – So…Where’s the Beef? What are the Risks: 1. Conventional E&P risks not applicable – source, trap, reservoir, economic size have all been established. Technology/process is mature. 2. Margin Risks: • Revenue: Volumes and Price • Costs: Capex, Opex, CO2 Purchases • Capex: Drilling/C
Slide 23: SACROC CO2 Flood – CAPEX Risk Assessment
SACROC CO2 Flood – CAPEX Risk Assessment CO2 1. CO2 purchase costs comprise 60% of $2.95 Opex future capital investment – at market $4.88 Wells prices. $1.36 2. Drilling and well workover costs comprise Facilities 29% of future investment. KM drilling $0.53 performance has improved relative to Drill
Slide 24: Drilling Operations
KINDER” MORGAN Drilling Operations
Slide 25: Facilities Installations
Facilities Installations 25
Slide 26: SACROC CO2 Flood – Opex Risk Assessment
SACROC CO2 Flood – Opex Risk Assessment OPEX: OPEX $/BOE Purchased Power CO2 Removal Labor All else KM as reduced unit cost structure 38% 12 since acquisition. 10 8 6 Purchased Power is largest single 4 component and is driven by 2 volumes. Hydrocarbon production 0 serves as a natural hedge. 2000 20
Slide 27: CO2 Project Highlights
SACROC CO2 Project Highlights Bullseye Project Announcement Volumes Producing 16,800 BOPD Injecting 220 MMSCF/D CO2 Development Summary 63 Patterns on CO2 injection (14% of planned) 168 Patterns expected by YE 2003 (37% of planned) Bullseye Project Summary SACROC PRODUCTION - 95 Patterns, $137 MM to
Slide 28: Development Pace
Development Pace Observation: The faster we go, the higher net present value becomes, however this must be balanced with higher execution risk. Two Key Issues: We must execute drilling operations and facilities installations on time, at the same time. We must install and operate a CO2 injection proc
Slide 29: Development Pace – Reservoir Variability
Development Pace – Reservoir Variability Platform Bullseye Centerline North Platform reservoir is substantially thicker and more prolific than the Centerline area. Bullseye project may give early clues to optimize Platform region development. 29
Slide 30: Development Pace – N. Platform
Development Pace – N. Platform Similar to CL 3-D Seismic data reveals portions of Platform area should behave similar to Centerline projects; other portions are much more prolific and may require a different project design. 30
Slide 31: SACROC CO2 Project: Pace Development Alternatives
SACROC CO2 Project Pace Development Alternatives Oil Production, B/D Current Status Limited Platform - Current Capacity Full Field - Current Capacity Accelerated Full Field Producing ~16,000 BOPD 60000 Injecting ~220 MMscf/D CO2 50000 40000 3,586 Acres (thru CL-V) 30000 20000 Development Options (#3
Slide 32: 2002 Achievements, 2003 Goals
2002 Achievements, 2003 Goals 2002 Significantly exceeded plan Volumes ahead, costs on, price hurt more than helped Secured significant cost improvements SACROC unit costs down Assumed Snyder Plant operations 2003 SACROC Development program Pursue strategic fit acquisitions, continue aggressive CO2
Slide 33: Long-Term Outlook / Goals
Long-Term Outlook / Goals Domestic oil reserve replacement costs are increasing CO2 flooding provides an attractive cost structure and a proven track record to add new reserves Kinder Morgan will leverage infrastructure in Permian Basin Lowest cost supply Largest reserves Innovative deals for produc