Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Deutsche Bank Pipeline & MLP 1x1 Conference 2018
52 slides from Kinder Morgan's conference presentation, May 9, 2018
Slide 1: Run for Shareholders, by Shareholders
Run for Shareholders, by Shareholders May 9, 2018 Deutsche Bank Pipeline & MLP 1x1 Conference David Michels, Vice President & Chief Financial Officer
Slide 2: Disclosure
Disclosure Forward Looking Statements / Non-GAAP Financial Measures 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 conduct their own analysis a
Slide 3: Unparalleled Asset Footprint
Unparalleled Asset Footprint One of the Largest Energy Infrastructure Companies in North America Natural Gas Pipelines Largest natural gas transmission network in North America Own or operate ~70,000 miles of natural gas pipeline Connected to every important U.S. natural gas resource play Prod
Slide 4: KMI & KML Overview
KMI & KML Overview Management is Aligned with Investors 14% MANAGEMENT STAKE IN KMI MANAGEMENT IS ALIGNED WITH INVESTOR INTERESTS Management & Public Public Directors(a) Float Float ~320mm (14%) ~1,894mm (86%) ~104mm (30%) C-corp, NYSE: KMI C-corp, TSX: KML Market Equity $38.3B(b) Market Equity C$6.
Slide 5: Kinder Morgan's Strategy
Kinder Morgan’s Strategy Focus on stable, fee-based assets that are core to North American energy infrastructure Core Fee-Based Market leader in each of our business segments Assets Fees largely independent of commodity prices and substantially secured by take-or-pay contracts Our primary in
Slide 6: KMI's Evolution
KMI’s Evolution Adjusted Course in Early Response to Industry Catalysts Industry Catalysts KMI Actions and Achievements Oil prices declined from over $100/bbl in KMI became a pure C-corp and eliminated 2014 to below $30/bbl in 2016 2014 IDRs in acquisition of its MLPs Reduced dividend in 2015;
Slide 7: KMI's Recent Evolution: Corner Has Been Turned
KMI’s Recent Evolution: Corner Has Been Turned Results in Strong Financial Profile that Matches Portfolio of Stable Assets Year-End Net Debt / Adjusted EBITDA Dividend Coverage 5.6x 4.0x 4.0x 5.3x 2.6x 5.1x 5.1x 1.3x 2015 2016 2017 2018B 2015 2016 2017 2018B Equity Issuance ($mm) DCF Less Dividend L
Slide 8: KMI 2018 Guidance: Published Budget
KMI 2018 Guidance: Published Budget Supported by Diversified, Fee-Based Cash Flow KMI 2018 Budget Commentary 2018 ∆ from On our 1Q18 earnings call, management Budget 2017 indicated KMI expects to meet or exceed its financial targets for the year Adjusted EBITDA $7,485 million 4% After dividend a
Slide 9: 2018 Budgeted EBDA by Business Segment
2018 Budgeted EBDA by Business Segment 93% of 2018B EBDA is Generated from Pipelines and Terminals Kinder Morgan Canada 100% petroleum pipelines CO2 66% oil production related 34% source & transportation 4% 3% 7% Terminals Natural Gas Pipelines 80% liquids 73% interstate pipelines — 64% terminals 15
Slide 10: Contracts & Asset Footprint Protect KM Cash Flow
Contracts & Asset Footprint Protect KM Cash Flow 96% of 2018B Cash Flow is Independent of Commodity Price 2018B Segment EBDA of $8.1 Billion(a) Stability of Cash Flows Fee-Based Take-or-Pay (66%): highly dependable cash flow — Entitled to payment regardless of throughput 66% Fee-Based Other Fee-Base
Slide 11: Attractive Results on Recent Expansion Projects
Attractive Results on Recent Expansion Projects Capital Invested / Year-2 EBITDA(a) THE CAPEX MULTIPLE FOR PROJECTS COMPLETED DURING 2015 – 2017 HAS SLIGHTLY EXCEEDED OUR EXPECTATIONS 0x $15 $9.0 bn 7.9x 0x 7.6x $10 $4.6 bn 0x $1.5 bn $5.0 6.0x 6.1x 6.0x 0x 5.5x $3.0 bn – 4.9x 0x 4.5x ($5. 0x ($10 0
Slide 12: $12 Billion 5-Year Growth Project Backlog
$12 Billion 5-Year Growth Project Backlog(a) KMI’s Footprint Generates Significant Opportunities for Expansion / Extension High-Quality Growth Projects Driving Value Cumulative EBITDA from Fee-Based Growth Capital $1.7 billion World-class asset footprint generating significant attractive expansion
Slide 13: Recent Market Trends
Recent Market Trends Hydrocarbon Fuel Demand Remains Strong U.S. Natural Gas Demand, 2015-2019(a) U.S. Refined Product Demand, 2015-2019(b) NET U.S. LNG EXPORTS Continued steady, modest volume growth 20 18.0 18.5 18.7 16.9 17.3 5.6 4.1 Bcfd 3.9 4.0 3.5 15 4.0 3.9 2.0 1.7 1.7 mmbbld 1.6 1.7 0.4 1.5
Slide 14: KMI Positioned to Support Future of Natural Gas
KMI Positioned to Support Future of Natural Gas Kinder Morgan Transports ~40% of all Natural Gas Consumed in the U.S. Demand (Bcfd) 2017 2022 2027 5-yr ∆ 10-yr ∆ Net LNG Export Demand (Bcfd) Utica/Marc. Supply (Bcfd) INCREASED Total U.S. demand U.S. VOLUMES 79.5 98.7 = INCREASED 105.7 NEED26.2 19.2
Slide 15: KMI Business Risks
KMI Business Risks Summary Business Risks Regulatory — FERC rate cases (Products Pipelines and Natural Gas Pipelines) — Provincial, state, and local permitting issues CO2 crude oil production volumes Throughput on our volume-based assets Commodity prices — 2018 budget average strip price ass
Slide 16: KMI's Compelling Investment Thesis
KMI’s Compelling Investment Thesis Attractive Relative Value, Best-in-Class Dividend Growth and Coverage 2018E DCFPS / Price(a) EV / 2018E EBITDA(b) ATTRACTIVE RELATIVE VALUE UNDERVALUED RELATIVE TO PEERS 13% 14.0x Med: 11.9x 11% 10% Med: 9% 12.9x 12.4x 12.2x 11.7x 11.4x 11.0x 10.1x 9% 9% 9% 8% 9.2x
Slide 17: KMI's Compelling Investment Thesis (Cont'd)
KMI’s Compelling Investment Thesis (Cont’d) Returning Significant Value to Shareholders 60% dividend increase for 2018 to $0.80 per share from $0.50 per share in 2017 25% dividend growth annually for 2019 and 2020: $1.00 in 2019 and $1.25 in 2020 7.7% dividend yield based on current share price and
Slide 18: Well Positioned for Long-Term Success
Well Positioned for Long-Term Success Disciplined Capital Allocation and Operational Excellence Poised for Success Best is Yet to Come Cornerstone of management philosophy since inception: World class midstream assets generate value for shareholders Fee-based cash flows Excess cash flow will be
Slide 19: Appendix – Corporate Slides
Appendix – Corporate Slides 19
Slide 20: Energy Toll Road
Energy Toll Road Cash Flow Security Natural Gas Products Kinder Morgan Terminals CO2 Pipelines Pipelines Canada Segment Segment Segment Segment Segment Interstate & LNG: take-or-pay Liquids & Jones Act: Refined products: S&T: primarily Intrastate: ~76% take-or-pay(a,b) primarily take-or-pa
Slide 21: Questions You've Asked
Questions You’ve Asked: Answers to Frequently Asked Questions Q1. What is management’s — Our first priority is a healthy balance sheet: Long-term target for Debt / EBITDA is 5.0x or below; capital allocation Year-end 2018 budget is 5.1x philosophy? — We believe in investing in projects with positive
Slide 22: FERC Issued Three Tax Orders on 3/15/18
FERC Issued Three Tax Orders on 3/15/18 Summary of FERC Proposals Affecting Pipeline Ratemaking Regulation Tax Rate NOPR Revised Tax Policy FERC Notice of Proposed Rulemaking – interstate and FERC Revised Policy Statement on Treatment of Income intrastate natural gas pipelines; rate changes rela
Slide 23: KMI's Expected Impact from FERC Changes
KMI’s Expected Impact from FERC Changes Given settlements and moratoria that we have in place on several of our pipelines, we do not expect an incremental impact to our 2018-2019 outlook Reiterating our expectation from January before the NOPR came out, we expect the impact of FERC’s action to b
Slide 24: KMI Natural Gas Assets Are Critical to Many Needs
KMI Natural Gas Assets Are Critical to Many Needs Kinder Morgan Transports ~40% of all Natural Gas Consumed in the U.S. KM’s Natural Gas Assets Provide: Building blocks for critical, every-day products Backstop to enable renewable power generation Reliable energy source to supply growing elect
Slide 25: Deployed Over $60 Billion of Capital
Deployed Over $60 Billion of Capital Asset Investment & Acquisitions Since Inception Total Invested by Year(b,c,d) $8.0 $70 $6.8 $6.7 Expansion / Acq. $bn $7.0 $60 Cumulative $bn $6.0 $50 $5.0 $3.4 $3.4 $40 $3.3 $3.2 $3.2 $3.0 $4.0 $2.7 $2.4 $2.3 $30 $2.2 $3.0 $1.7 $1.7 $1.7 $1.6 $1.4 $1.4 $1.2 $1.1
Slide 26: Returns on Invested Capital
Returns on Invested Capital Targeted Returns for New Capital Investment Are Substantially Above Cost of Capital Commentary Segment ROI(a,b) Items leading to decline in 30% Nat Gas returns since 2012: Products Natural Gas Segment 25% Terminals – EPB included since 2013 CO2 (primarily a drop-down 20
Slide 27: Compliance is Important to Kinder Morgan
Compliance is Important to Kinder Morgan Kinder Morgan’s On-Time Compliance Metrics are Consistently High Operate in Compliance Kinder Morgan’s On-Time Compliance Performance On-time compliance is a critical leading indicator for In 2017, we tracked 540,000 compliance activities to the performan
Slide 28: Asset Integrity and Safety are Top Priorities
Asset Integrity and Safety are Top Priorities Kinder Morgan’s EHS Metrics Consistently Outperform the Industry Operate Safely & Efficiently Kinder Morgan’s Safety Performance vs. Industry(a) Safe operation of our assets is mission critical to our We track 36+ safety metrics and post monthly long
Slide 29: KMI: 2018B Growth Capital
KMI: 2018B Growth Capital $ Millions 2018 2017 Growth capital Forecast(a) Actual Natural Gas Pipelines $ 1,801 $ 1,602 CO2 - S&T 30 19 CO2 - EOR 369 410 Products Pipelines 97 267 Terminals 49 629 Kinder Morgan Canada - 55 Total growth capital $ 2,346 $ 2,982 FULLY FUNDED BY INTERNALLY GENERATED CASH
Slide 30: KMI: Credit Ratios and Liquidity
KMI: Credit Ratios and Liquidity(a) $ Millions 2018 Consolidated leverage metrics 2014 2015 2016 2017 Budget Net debt(b) to Adjusted EBITDA 5.5x 5.6x 5.3x 5.1x 5.1x KMI revolver capacity(c) KMI long-term debt maturities(d) Committed revolving credit facility $ 5,000 2018 $ 477 Less: 2019 2,800 CP /
Slide 31: Appendix – KMI Business Segment Overview
Appendix – KMI Business Segment Overview 31
Slide 32: Natural Gas Pipelines Segment Outlook and Asset Overview
Natural Gas Pipelines Segment Outlook and Asset Overview Well-Positioned: Connecting Key Natural Gas Resources with Major Demand Centers Long-Term Growth Drivers Asset Summary Natural Gas Pipelines: 70,000 Miles Shale-driven expansions / U.S Nat Gas Moved by KM: ~40% extensions Working Gas Storage
Slide 33: Project Highlight: Gulf Coast Express (GCX)
Natural Gas Pipelines Project Highlight: Gulf Coast Express (GCX) Joint Venture Project Satisfying Multiple Growth Drivers Project Overview Project Drivers / Asset Overview Project Scope Project Drivers Mainline: 447.5 miles of 42” pipeline originating at the Waha Producer push project to transp
Slide 34: Growth Driver: Exports – Liquefied Natural Gas
Natural Gas Pipelines Growth Driver: Exports – Liquefied Natural Gas Kinder Morgan Leverages Asset Footprint to Facilitate Booming U.S. LNG Exports Global Demand Drives Opportunity for U.S. to Export KM Plans to Participate 18.5 Bcfd of FERC-approved projects for U.S. LNG export Nine active tran
Slide 35: Growth Driver: Exports – Mexico
Natural Gas Pipelines Growth Driver: Exports – Mexico In 2017 Kinder Morgan Delivered ~70% of U.S. Exports to Mexico Mexico Natural Gas Market KM Plans to Participate U.S. Exports to Mexico are expected to grow by ~2 Bcfd to 6.1 KM’s extensive footprint with access to numerous supply basins, Bcf
Slide 36: Contracted Capacity and Term by Region
Natural Gas Pipelines Contracted Capacity and Term by Region Contracted Average Term Region Capacity Remaining Storage 326 Bcf 2 yr, 11 mo NORTH Transport 19.3 Bcfd 6 yr, 3 mo Storage 52 Bcf 1 yr, 8 mo Interstate SOUTH Transport 13.2 Bcfd 7 yr, 2 mo Transport Contracts LNG 18 Bcf 14 yr, 5 mo Avg. =
Slide 37: Products Pipelines Segment Outlook and Asset Overview
Products Pipelines Segment Outlook and Asset Overview Products Pipelines: Stable, Strategic Assets Long-Term Stability Asset Summary Pipelines: ~10,000 Miles Steady demand for refined 2017 Throughput: ~2.1 mmbbld products volumes on strategically Condensate Processing Capability: 100 mbbld located
Slide 38: Terminals Segment Outlook and Asset Overview
Terminals Segment Outlook and Asset Overview A Diversified System Across Liquid and Bulk Hubs and Services Long-Term Growth Drivers Asset Summary North American Logistics Bulk 35 Solutions Liquids 51 — Crude and NGL growth Total KMT: 86 Terminals — Refining and petrochemical KMPP: 66 growth Total
Slide 39: Terminals' Fee-Based Business
Terminals Terminals’ Fee-Based Business Earnings Predicated on Stable, Fee-Based Business Other 1% Take-or-Pay Term leased tank capacity (monthly) Term tanker charters (monthly) Other Fee- 74% Term volumes (per bbl or ton) Based 17% 2018B Requirements EBDA Fixed Take-or- Pay Requirements(a)
Slide 40: Liquids Terminals
Terminals Liquids Terminals ~$5.8 Billion Invested Capital since 2010 – Houston, Edmonton & Jones Act Tankers Edmonton North 40 Alberta Edmonton South Alberta Crude Terminal Rail Edmonton South Rail Terminal Base Line Tank Terminal Van Wharves Hub Terminals New York Houston Ship New York Edmonton Ha
Slide 41: Jones Act Tankers
Terminals Jones Act Tankers Largest, Most modern and Efficient Fleet in the United States APT Overview Jones Act Tankers: Contract Schedule American Petroleum Tankers (APT) Vessel 0 2018 12 2019 24 2020 36 2021 48 2022 60 — Final 4 vessels delivered in 2017 — Largest Jones Act tanker fleet Palmett
Slide 42: CO2 Segment Outlook and Asset Overview
CO2 Segment Outlook and Asset Overview Own and Operate CO2 for Enhanced Oil Recovery (EOR) Long-Term Growth Drivers Asset Summary Demand for scarce supply of CO2 drives volume and price Production: Gross 2018 CO2 SW Colorado 1.3 bcfpd 2018 Oil 57 mbopd Trillions of cubic feet of recoverable CO2
Slide 43: CO2 Segment Significant Returns and FCF
CO2 CO2 Segment Significant Returns and FCF Generating High Returns and ~$6 Billion in Cumulative Free Cash Flow IRR% 2000-2017 Cumulative FCF Generation $bn $5.8 30.0% $5.3 $4.9 25.0% $4.2 20.0% $3.7 $3.1 15.0% $2.7 10.0% 5.0% – O&G Total CO2 Segment 2012 2013 2014 2015 2016 2017 2018B (incl. S&T)
Slide 44: Continued Focus on High-Return Projects
CO2 Continued Focus on High-Return Projects 2018 Project Returns at Various Flat Pricing Levels Yates HZ Drain Hole Program SACROC Conventional 80% 75% 80% 65% Long Lateral Bullseye Phase 2 60% 60% 48% 46% ATIRR% ATIRR% 40% 40% 40% 28% 40% 33% 20% 20% 20% – – $50 $56.50 $60 $50 $56.50 $60 Flat WTI (
Slide 45: Big Fields Get Bigger
CO2 Big Fields Get Bigger Successful Track Record of Extending SACROC Production Life Big Fields SACROC Net Oil Production Forecasts SACROC – 2.8 billion barrels of original oil in 35,000 place Yates – 5.0 billion barrels of original oil in place 30,000 SACROC Strategy Long track record of exp
Slide 46: Kinder Morgan Canada Segment Outlook and Asset Overview
Kinder Morgan Canada Segment Outlook and Asset Overview Sole Oil Pipeline Providing Oilsands Production Access to West Coast / Export Markets Long-Term Growth Drivers Asset Summary Pipeline Miles 2017 Throughput Constrained pipeline capacity Trans Mountain ~715 ~0.3 mmbbld — Trans Mountain only pi
Slide 47: TMEP Status
TMEP Status Suspending Non-Essential Spend; Decision Whether or Not to Cancel Expected 5/31/18 On April 8, 2018 KML announced suspension of all non-essential activities and related spending on TMEP Given British Columbia’s continued actions in opposition to the project and other outstanding judi
Slide 48: Use of Non-GAAP Financial Measures
Use of 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, segment earnings before depreciation, depletion, amortization and amortization of excess cost of equity investments
Slide 49: KMI GAAP Reconciliation
KMI GAAP Reconciliation $ in Millions Yr. Ended Yr. Ended Reconciliation of DCF 12/31/17 Reconciliation of Adjusted EBITDA 12/31/17 Net Income $ 223 Net Income $ 223 Certain Items 1,445 Certain Items 1,445 Net Income before Certain Items (Adjusted Earnings) 1,668 Net Income before Certain Items (Adj
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Slide 52: Deutsche Bank Pipeline & MLP 1x1 Conference
Deutsche Bank Pipeline & MLP 1x1 Conference David Michels, Vice President & Chief Financial Officer
Kinder Morgan — Deutsche Bank Pipeline & MLP 1x1 Conference 2018 on 6ix