Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — 2004 Analyst Conference
37 slides from Kinder Morgan's conference presentation, Jan 23, 2004
Slide 1: CO2 - Tim Bradley
KINDER’ MORGAN Co, Tim Bradley
Slide 2: CO2 Pipelines Segment Overview
CO2 Pipelines Segment Overview (a) CO2 Contribution to 2004 KMP Estimated breakout of CO2 DCF (b) Segment DCF (a) Natural Other CO2 Gas Flood Pipelines Properties CO2 Sales/PL 26% <1% 26% CO2 Pipelines SACROC Products 24% 54% Pipelines 33% Yates Terminals Oil 17% 17% Pipelines 2% (a) 2004 budgeted d
Slide 3: CO2 Business – View from the top
CO2 Business – View from the top Excited about this business! McElmo Dome averaged 1 BCF/D during December 2003 SACROC continues to increase cash flow and yield profitable investments Yates affords long stable production profile Challenges Expeditiously execute infrastructure projects at SACROC to f
Slide 4: 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 Bravo Dome 11% NE New Mexico 14 years Oxy Colorado McElmo Dome Kansas Company Capacity Pipelines Ownership Location (MMcf/d) Operator Bravo Dome Cortez
Slide 5: Promises Made, Promises Delivered
Promises Made, Promises Delivered Promise Made: Promise Delivered: CO2 Sales/Transport business flat 2002 Deliveries: 152 BCF 2003 Deliveries: 174 BCF CO2 Flood Development opportunities 2003 SACROC Plan DCF: 56.6 MM$* are growing 2003 SACROC DCF: 72.5 MM$* SACROC Development (Gross): Produce 20,000
Slide 6: Comparison of 2001-2004 Distributable Cash
Comparison of 2001, 2002, 2003, 2004 – Distributable Cash CO2 Sales and Transportation - steady growth CO2 Flood Development Opportunities - growing faster CO2 S&T CO2 Flood Properties $350 $300 $250 DCF - MM$ $200 Plan for each Year $150 $100 $50 $0 2001 2002 2003 2004 Actual Actual Actual Plan Not
Slide 7: 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 2003 Deliveries Others 9% MMcf/d 1600 1400 1200 1000 Oxy 24% KM 44% 800 600 400 McElmo Dome 65% 200 XOM 23% 0 1984 1988 1992 1996 2000 McElmo Dome Bravo Dome Sheep
Slide 8: Kinder Morgan CO2 Deliveries
Kinder Morgan CO2 Deliveries SACROC deliveries are an increasing percent of Kinder Morgan CO2 deliveries Customer Base 2003 – 503 MMCF/d Customer Base 2004 – 521 MMCF/d ChevTex Other Other Hess ChevTex SACROC BP SACROC OXY OXY 8
Slide 9: Centerline Pipeline Project Overview
Centerline Pipeline Project Overview Project Summary •Started construction 12/1/02 •Planned In Service 8/01/2003 •In Service 5/13/2003 •AFE Budget $39.5 MM •Total Cost $28.5MM •Design Flow 250 MMSCF/D •Actual Maximum 295 MMSCF/D 9
Slide 10: SACROC CO2 Flood – Volumes Performance
SACROC CO2 Flood – Volumes Performance 700 600 Gas production has run higher 500 MMCF/D 400 than forecast resulting in lower 300 purchases and temporary 200 100 curtailments in oil production. 0 2000 2001 2002 2003 2004 Plan Actual Production Orig Plan Prod Actual Purchase Orig Plan Purch Actual CO2
Slide 11: SACROC CO2 Flood – Cost Performance
SACROC CO2 Flood – Cost Performance Purchased Power CO2 Removal Labor All else 12 10 8 $/BOE 6 Unit Operating Costs have remained 4 in 2 check despite 30% cost per Kw 0 increase. 2000 2001 2002 2003 2004 plan Original Actual 250 200 150 MM$ Capex has been within 2% of Plan. 100 50 0 CL III CL IV CL
Slide 12: CenterLine III Project Development
CenterLine III Project Development Project Performance and Learnings 4500 4000 3500 Actual 3000 Curr Fcst 2500 Orig Fcst 2000 1500 1000 Oil 500 350000 Capex [$/BOE]: Orig Curr 30000 Wells $ .95 $1.18 25000 Field Facilities $ .35 $ .47 20000 Infrastructure $1.16 $1.36 15000 CO2 Prod 10000 Opex [$/BOE
Slide 13: SACROC CO2 Flood – CenterLine III Project Development
SACROC CO2 Flood – CenterLine III Project Development Cash Flow Analysis - CL III 50000 Capex = 39.8 MM$ 40000 Cum NCF = 44.8 MM$ PV NCF = 17.9 MM$ IRR = 53% 30000 Revenue 20000 Opex CO2 Inj. Expense M$ 10000 CO2 Inj. Capex Sus. Capex 0 Field/Facilities Capex 2000 2001 2002 2003 2004 2005 2006 2007
Slide 14: SACROC CO2 Flood – Phased Project Development
SACROC CO2 Flood – Phased Project Development 60000 CR 2-4 No Platform Full Field Development (2002 Forward): 50000 Oil So Platform 2 GI 40000 So Platform 1 BE 3 1. Capex: 30000 CenterRing I Wells - $ .78/BOE 20000 BullsEye CenterLine Field Facilities - $ .89/BOE 10000 Base Infrastructure - $ .62/BO
Slide 15: Future SACROC Development Economics
Future SACROC Development Economics - Projects are resilient in low price environment Unlevered IRR (CO2 Cost @ contract price) Initial Projects (Fully Burdened by Infrastructure Investment) Future Incremental Projects (Limited Infrastructure Investment) 100% 80% 60% 40% 20% 0% $10 $15 $20 $25 $30 B
Slide 16: SACROC Long Term Potential
SACROC Long Term Potential Daily Oil Production 1980-2010 100,000 Pre-2000 - Cumulative oil production 1.25 Billion barrels, 75,000 44.5 % OOIP, Production 8500 BOPD 50,000 2002 - Average oil production 13,052 BOPD - Average CO2 injection 212 MMCF/D 25,000 - SACROC EBITDA* 31.3 MM$ (EOR Operations)
Slide 17: 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. 17
Slide 18: North Platform Development Planning
North Platform Development Planning 18
Slide 19: 2004 Expansion Capital Budget
2004 Expansion Capital Budget – 309 MM$ Staff OVHD Source/Trans. Yates CO2 Fac, Var Yates HDH SACROC Wells SACROC Power Gen. SACROC Field Fac. SACROC Gas SACROC CO2 Inj Handling 19
Slide 20: Power Generation Project Summary
Power Generation Project Summary Off Spec Gas and Existing Agreements Provide Unique Opportunity Pipeline Spec 3% Nitrogen, Current concentration 12% Nitrogen If gas is sold then 14% royalty and 7.5% tax paid; If burned on lease then no royalty and tax paid Disposal Options for Gas …….. Developed ad
Slide 21: Yates Pictures
KINDER”) MORGAN Yates Pictures
Slide 22: Yates Field Historical Overview
Yates Field Historical Overview Pre-2000 - Field Discovery 1926. Unitized 1976 Daily Oil Production 1975 - Present - Brief CO2 injection 1988-1993 followed by N2 150,000 injection 1993-2003 125,000 2001 - MKM Joint Venture formed, Kinder Morgan 100,000 acquires 7.49% interest 75,000 - Cumulative oil
Slide 23: Yates Original Oil in Place, Recovery
Yates Original Oil in Place, Recovery Gross BBO 7Rv/Qn/Gbg 0.5 SA (above 1,050’) 2.8 SA (950’ –1,050’) 1.4 1,050’ Total SA (above 950’) 4.2 950’ SA (below 950’) 0.3 TOTAL 5.0 Cum Production 1.4 23
Slide 24: Yates Animation
KINDER’ MORGAN Yates Animation
Slide 25: Horizontal Workovers & Fracture Connectivity
Horizontal Workovers & Fracture Connectivity Gas Gas Oil Oil Water Water At this elevation and column At a lower elevation and thickness, the fractures form a thinner column, the fracture continuous connected pathway connectivity within the oil between the two wells. column is reduced. LACK OF CONNE
Slide 26: Base Case Profiles
MBOE per Day 0 5 10 15 20 25 2003 2004 2005 2006 $15 mm Net Capex * 2007 2008 2009 Base 2010 2011 2012 2013 2014 2015 2016 2017 2018 HDH 2019 Base Case Profiles 2020 2021 2022 2023 2024 2025 2026 CO2 2027 2028 2029 2030 26
Slide 27: Base Case Profiles, with N2 Rejection
Base Case Profiles, with N2 Rejection 25 20 15 Net Capex* $15 mm Net Capex* MBOE $56 mm per Day 10 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Base HDH CO2 CO2 - N2 Rejection * Expansion capital 27
Slide 28: Comparison of SACROC and Yates Operating Cost Structure 2004 Plan
Comparison of SACROC and Yates Operating Cost Structure 2004 Plan 14 Toti 12 Other 10 8 CO2 Purchase Capitalized 6 CO2 Purchase 4 Expense Gas Handling 2 0 Labor SACROC Yates 28
Slide 29: Comparison of SACROC and Yates Operating Cost Structure 2004 Forward
Comparison of SACROC and Yates Operating Cost Structure 2004 Forward 14 Toti 12 Other 10 8 CO2 Purchase Capitalized 6 CO2 Purchase 4 Expense Gas Handling 2 0 Labor SACROC Yates 29
Slide 30: Comparison of SACROC and Yates Gross CAPEX
Comparison of SACROC and Yates Gross CAPEX* 300 250 200 SACROC 150 Yates 100 50 0 2004 2005 2006 *Note: Represents 8/8 30
Slide 31: SACROC and Yates – Hedge Position
SACROC and Yates – Hedge Position Average Hedge WTI $23.79 $23.53 $23.28 $23.27 $23.88 $24.95 Price 60,000 50,000 40,000 Net Equity Production* (BOPD) 81% 30,000 58% 38% 20,000 27% 10,000 13% 4% - 2004 2005 2006 2007 2008 2009 Hedged Production Unhedged Production Approved Plus Potential Projects *
Slide 32: Impact of Oil Price/Volume Variance on 2004 DCF
Impact of Oil Price/Volume Variance on 2004 DCF 2004 Budget: 317.2 MM$ SACROC +/- 1000 BOPD 8.2 MM$ +/- $1/BBL vs $27.45 WTI 0.6 MM$ Yates +/- 1000 BOPD 3.8 MM$ +/- $1/BBL vs $23.81 WTS 1.6 MM$ 3rd Party CO2 Deliveries + 50 MMCF/D 6.0 MM$ 32
Slide 33: SACROC plus Yates Long Term Potential
SACROC plus Yates Long Term Potential Oil Production, B/D Current Status Yates SACROC + Yates 90 SACROC Producing ~24,000 BOPD 80 70 Yates Producing ~18,000 BOPD 60 50 40 Development Plans 30 20 1. SACROC Full Field, Accelerated Development 10 0 - 266 MMBOE Gross, ~20,200 Acres, 1015 MM$* 03 04 05 0
Slide 34: Kaston Pipeline Acquisition Opportunity
Kaston Pipeline Acquisition Opportunity Sacroc Yates 34
Slide 35: 2003 Achievements, 2004 Goals
2003 Achievements, 2004 Goals 2003 Exceeded plan Volumes on, costs improved, price helped Secured significant cost improvements SACROC unit costs down Closed Key Acquisition Increased SACROC ownership to 97%, Yates to nearly 50% 2004 SACROC Development program – Stay the course Commence CO2 injectio
Slide 36: 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 CO2 supply combined with largest reserves, infrastr
Slide 37: Kinder Morgan
KINDER’ MORGAN