Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Credit Suisse 23rd Annual Energy Summit (February 2018)
58 slides from Kinder Morgan's conference presentation, Feb 14, 2018
Slide 1: Run for Shareholders, by Shareholders
Run for Shareholders, by Shareholders February 14, 2018 Kimberly Dang, Chief Financial Officer Credit Suisse Vail Energy Summit
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: Disclosure
Disclosure Forward Looking Statements / Non-GAAP Financial Measures KML FLS – Forward-looking statements in this presentation include statements, express or implied, concerning: (i) the Trans Mountain Expansion Project ("TMEP") and Base Line Terminal project, including completion of such projects, c
Slide 4: 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 5: 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 ~321mm (14%) ~1,907mm (86%) ~103mm (30%) C-corp, NYSE: KMI C-corp, TSX: KML Market Equity $43.1B(b) Market Equity C$6.
Slide 6: 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 7: 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 8: KMI 2018 Guidance: Published Budget
KMI 2018 Guidance: Published Budget Supported by Diversified, Fee-Based Cash Flow KMI 2018 Budget Commentary 2018 ∆ from 2018B excess cash flow of $568 million Budget 2017 After dividend and Capex, excess cash flow Adjusted EBITDA $7,485 million 4% will be invested in: — Additional high-return p
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 Hedged (6%): disciplined approach to managing price volatility — CO2 actual oil volumes produced have been within 1.5% of budget 4%
Slide 11: 5-Year Growth Project Backlog
5-Year Growth Project Backlog(a) ~$12 Billion of Attractive, Substantially Fee-Based Projects High-Quality Growth Projects Driving Value Cumulative Adjusted EBITDA $1.6 billion World-class asset footprint has driven attractive growth opportunities, secured by long-term, fee- based contracts with c
Slide 12: 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 17.3 18.0 18.1 18.2 5.6 16.9 Bcfd 3.5 3.9 3.9 4.0 4.0 2.0 4.0 mmbbld 0.4 1.6 1.7 1.7 1.7 1.5 (0.1)
Slide 13: 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.79.5 VOLUMES 98.7 = INCREASED 105.7 NEED26.2 19.2 F
Slide 14: 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 deliver value to shareholders Fee-based cash flows Excess cash flow will be us
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 Price / 2018E DCFPS(a) EV / 2018E EBITDA(b) ATTRACTIVE RELATIVE VALUE UNDERVALUED RELATIVE TO PEERS 16.4x 14.8x Med: 12.1x Med: 12.5x 14.5x 13.4x 13.4x 13.2x 12.1x 11.7x 12.5x 12.1x 11.3x 11.6x 1
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 $2 billion share buyback ~5% of KMI’s current market
Slide 18: Appendix – Corporate Slides
Appendix – Corporate Slides 18
Slide 19: 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 20: 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 $30/bbl in 2016 2014 IDRs in acquisition of its MLPs Reduced dividend in 2015;
Slide 21: KMI's Recent Evolution: Corner Has Been Turned
KMI’s Recent Evolution: Corner Has Been Turned Results in Strong Financial Profile that Matches Portfolio of Stable Assets Year-End Net Debt / Adjusted EBITDA Dividend Coverage 5.6x 4.0x 4.0x 5.3x 2.6x 5.1x 5.1x 1.3x 2015 2016 2017 2018B 2015 2016 2017 2018B Equity Issuance ($mm) DCF Less Dividend L
Slide 22: 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 23: Energy Toll Road
Energy Toll Road Cash Flow Security Natural Gas Products Kinder Morgan Terminals CO2 Pipelines Pipelines Canada Interstate & LNG: take-or-pay Liquids & Jones Act: Refined products: S&T: primarily Intrastate:~76% take-or-pay(a,b) primarily take-or-pay Volume primarily volume-based minimum v
Slide 24: KMI: 2018B Growth Capital
KMI: 2018B Growth Capital $ Millions 2018 2017 Growth capital Budget (a) Actual Natural Gas Pipelines $ 1,633 $ 1,602 CO2 - S&T 32 19 CO2 - EOR 420 410 Products Pipelines 86 267 Terminals 44 629 Kinder Morgan Canada - 55 Total growth capital $ 2,215 $ 2,982 FULLY FUNDED BY INTERNALLY GENERATED CASH
Slide 25: 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 $ 2,322 Less: 2019 2,813 CP
Slide 26: 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 $20
Slide 27: 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 28: 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 29: 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 30: Appendix – KMI Business Segment Overview
Appendix – KMI Business Segment Overview 30
Slide 31: 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 32: 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: 82 miles of 36” pipeline and 365 miles of 42” Producer push project to transport pr
Slide 33: 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 Eight active tra
Slide 34: Growth Driver: Exports – Mexico
Natural Gas Pipelines Growth Driver: Exports – Mexico Kinder Morgan Delivers ~71% of U.S. Exports to Mexico (2017 YTD through October) 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
Slide 35: 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 36: 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 37: Project Highlight: Utopia Pipeline Project
Products Pipelines Project Highlight: Utopia Pipeline Project Supported by Long-Term Volume Commitment Project Overview Asset Overview Project Scope 50/50 JV with Riverstone Holdings 267-mile12” pipeline Will transport ethane from points in Harrison County, Ohio to Windsor, Ontario, Canada I
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 New York Edmonton Harbor
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) 2018 2019 2020 2021 2022 Vessel 0 12 24 36 48 60 — Final 4 vessels delivered in 2017 — Largest Jones Act tanker fleet Pal me
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 CO 2 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 $60 Flat WTI (
Slide 45: Big Fields Get Bigger
CO2 Big Fields Get Bigger Successful Track Record of Extending SACROC Production Life Big Fields SACROC Net Oil Production Forecasts SACROC – 2.8 billion barrels of original oil in 35,000 place Yates – 5.0 billion barrels of original oil in place 30,000 SACROC Strategy Long track record of exp
Slide 46: Kinder Morgan Canada Segment Outlook and Asset Overview
Kinder Morgan Canada Segment Outlook and Asset Overview Sole Oil Pipeline Providing Oilsands Production Access to West Coast / Export Markets Long-Term Growth Drivers Asset Summary Pipeline Miles 2017 Throughput Constrained pipeline capacity Trans Mountain ~715 ~0.3 mmbbld — Trans Mountain only pi
Slide 47: Appendix – KML Overview
KINDERMORGAN Appendix — KML Overview 47
Slide 48: KML Overview
KML Overview Integrated Network of Strategically Located Assets KML Summary KML Assets(b) A premier integrated network of pipeline systems Asset Summary and terminal facilities serving Western Canada Miles of Pipe: ~1,435 Miles Initial Public Offering on TSX in May 2017 2017 Throughput ~0.4 mmbb
Slide 49: KML: 2018 Published Budget
KML: 2018 Published Budget Supported by Fee-Based Cash Flow KML 2018 Budget (C$) 2018 Budget Highlights ∆ from YoY ∆ in Business Segment 2018 Budget 2017 EBDA Commentary Adjusted EBITDA(a) C$474 million 22% Additional capitalized equity Distributable Cash Flow(a) C$349 million 8% Pipelines +27% fi
Slide 50: Project Highlight: Trans Mountain Expansion
Project Highlight: Trans Mountain Expansion Only Crude Oil Pipeline Serving Canadian West Coast Trans Mountain Expansion Project (TMEP) TMEP Overview Project Scope Expansion to 890 mbbld from 300 mbbld today 615 miles new pipe; 12 new pump stations 630 mbbld tanker export capacity; 3 new berth
Slide 51: Trans Mountain Expansion Project Status
Trans Mountain Expansion Project Status Actively Evaluating Mitigation Efforts Current TMEP Status Original estimated in-service date of December 2019 Slower than expected permitting process thus far could result in a delay estimated at up to 12 months (to Dec. 2020) — We continue to evaluate mi
Slide 52: KML Business Risks and Key Assumptions
KML Business Risks and Key Assumptions Summary Business Risks Project cost overruns and in-service delays Regulatory — Legislative and regulatory changes — Federal, provincial, state and local — Regulatory cost and indexing approvals Non-governmental individuals and organizations could impact
Slide 53: KML Business Risks and Key Assumptions
KML Business Risks and Key Assumptions Base Business – Our base business is expected to be relatively stable, though it is subject to re-contracting and other risks 2018 Adjusted EBITDA — Includes $71 million of capitalized equity financing costs (AEDC) related to TMEP based on prior capital spe
Slide 54: Appendix – Other
KINDERMORGAN Appendix — Other
Slide 55: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures The non-GAAP financial measures of distributable cash flow (DCF), both in the aggregate and per share, Segment EBDA before Certain Items (in the case of KMI only), Adjusted EBITDA, and Adjusted Earnings, both in the aggregate and per share, are presented herein. Ou
Slide 56: Use of Non-GAAP Financial Measures (Cont'd)
Use of Non-GAAP Financial Measures (Cont’d) Adjusted EBITDA is calculated by adjusting net income before interest expense, taxes, and DD&A (EBITDA) for Certain Items, and for KMI, by also adjusting net income before Certain Items for noncontrolling interests before Certain Items, and our share, if a
Slide 57: 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
Slide 58: KML GAAP Reconciliation
KML GAAP Reconciliation $ in Millions of CAD Yr. Ended Yr. Ended Reconciliation of DCF 12/31/17 Reconciliation of Adjusted EBITDA 12/31/17 Net Income $ 160 Net Income $ 160 Certain Items 4 Certain Items 4 Net Income before Certain Items (Adjusted Earnings) 164 Net Income before Certain Items (Adjust
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