Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Investor Presentation (August 2019)
48 slides from Kinder Morgan's investor presentation, Aug 13, 2019
Slide 1: Investor Presentation August 2019
Investor Presentation August 2019
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: Global Energy Demand Expected to Grow for Decades to Come
Global Energy Demand Expected to Grow for Decades to Come More than 650 million people still expected to lack access to electricity in 2030 STEADY GROWTH IN GLOBAL ENERGY DEMAND DEMAND GROWTH DRIVEN BY DEVELOPING ECONOMIES Billion tons of oil equivalent % of projected incremental demand from 2017 to
Slide 4: U.S. is the Largest Oil and Gas Producer in the World
U.S. is the Largest Oil and Gas Producer in the World Reaching demand markets abroad expected to drive higher utilization of existing infrastructure and expansion opportunities OIL AND NATURAL GAS PRODUCTION Unmatched growth in U.S. oil and gas production Million barrels of oil equivalent per day
Slide 5: Kinder Morgan: Leader in North American Energy Infrastructure
Kinder Morgan: Leader in North American Energy Infrastructure Unparalleled and irreplaceable asset footprint built over decades CO2 & transport Largest natural gas transmission network CO2 EOR oil production 6% 4% Natural gas pipelines ~70,000 miles of natural gas pipelines Terminals 14% 657 Bcf
Slide 6: Cash Flow Generation Machine
Cash Flow Generation Machine ~$5 billion of 2019B distributable cash flow (DCF) = ~$2 billion for dividends + ~$3 billion to enhance shareholder value $ billions Common dividends declared DCF after dividends 2019B dividend coverage of 2.2x(a) $2.7 $2.9 $3.4 $3.4 $2.3 $1.8 $1.1 $1.1 2016 2017 2018 20
Slide 7: A Core Energy Infrastructure Holding
A Core Energy Infrastructure Holding Significant cash flow generation & returning significant value to shareholders >$40 billion market capitalization One of the 10 largest energy companies in the S&P 500; ~15% insider ownership Investment grade rated debt Recent upgrades to mid-BBB by S&P, Moody’s,
Slide 8: Stable, Fee-Based Cash Flow from High Quality Customers
Stable, Fee-Based Cash Flow from High Quality Customers Underpinned by multi-year contracts with diversified customer base STABLE CASH FLOWS(a) HIGH QUALITY CUSTOMERS(b) Not rated 4% 5% 11% B- or below 5% 25% 77% Customers 7% BB+ to B investment grade rated or substantial credit support >$5mm 66% (2
Slide 9: Capital Allocation Priorities
Capital Allocation Priorities Right-sized balance sheet & set dividend target through 2020 Balance Capital Share Dividend Sheet Projects Repurchase Return threshold for new projects well in ~$4.4bn of available excess of cost of Repurchased liquidity from cash Dividend targets set capital $525mm of
Slide 10: Substantial Growth Projected for U.S. Natural Gas Supply
Substantial Growth Projected for U.S. Natural Gas Supply Kinder Morgan network connects key supply basins to multiple demand points along the Gulf Coast KEY BASINS DRIVING U.S. GROWTH 2018 to 2030 growth in Bcfd Additional 38 Bcfd expected from 14 four basins Marcellus 13 / Utica +51% 8 Permian Hayn
Slide 11: U.S. Natural Gas Demand is Concentrated in Gulf Coast
U.S. Natural Gas Demand is Concentrated in Gulf Coast >70% of forecasted 2018-2030 growth is in Texas and Louisiana, where we have significant assets in place Forecasted Texas and Louisiana demand and export growth between 2018 and 2030: Industrial LNG Export Demand +30% Demand +2 Bcfd +581% +15 Bcf
Slide 12: $5.7bn of Commercially-Secured Capital Projects Underway
$5.7bn of Commercially-Secured Capital Projects Underway ~$400 million of new projects added during Q2 2019 & over $1 billion added year-to-date Demand Pull / KMI Capital Estimated (as of 6/30/2019) Supply Push ($ billion) In-Service Date Capacity Natural Gas Permian takeaway projects (GCX, PHP, TX
Slide 13: Leading the Way Out of the Permian
Leading the Way Out of the Permian Building the first two new natural gas pipelines out of the basin Leveraging existing footprint into new takeaway capacity that reaches Natural Gas Pipelines across Texas and connects into major demand markets Under Construction Crude Pipelines Our advantaged net
Slide 14: Competitively Priced U.S. Natural Gas Drives LNG Opportunity
Competitively Priced U.S. Natural Gas Drives LNG Opportunity U.S. LNG exports expected to more than quadruple by 2025 NATURAL GAS PRICES(a) PROJECTED U.S. LNG EXPORTS(b) $ / mmbtu Bcfd 18 18.8 15 16.3 12 Japan 9 European Union 6 United States 3 3.0 2000 2010 2020 2030 2040 2018 2025 2030 In-service
Slide 15: Supporting the Buildout of U.S. LNG Exports
Supporting the Buildout of U.S. LNG Exports Serving significant liquefaction capacity & well-positioned to capture more third-party LNG terminals Kinder Morgan network advantages: Natural gas leader ~70,000 miles of natural gas pipelines Move ~40% of U.S. natural gas Supply diversity Connected to ev
Slide 16: Attractive Growth in Exports of U.S. Petroleum Liquids
Attractive Growth in Exports of U.S. Petroleum Liquids Competitive & growing U.S. supplies reach a diverse mix of global customers U.S. EXPORTS OF PETROLEUM LIQUIDS DESTINATIONS OF U.S. PETROLEUM LIQUIDS EXPORTS Millions of barrels per day Top 5 of 103 countries reached in January through May 2019 9
Slide 17: Leading Exporter of U.S. Gasoline and Distillates
Leading Exporter of U.S. Gasoline and Distillates Our Houston Ship Channel exports have grown faster than the broader U.S. market over the last several years U.S. EXPORTS KM EXPORTS FROM GULF COAST TERMINALS Millions of barrels per day Thousands of barrels per day 3.0 400 350 2.5 300 2.0 250 1.5 200
Slide 18: Largest Independent Refined Products Terminal Hub in the U.S.
Largest Independent Refined Products Terminal Hub in the U.S. Handles 15% of U.S. exports of distillates, gasoline & gasoline blendstocks(a) Our unmatched scale and flexibility on the Houston Ship Channel: KM terminals & assets refined products terminals 43 million barrels total capacity Colonial Ex
Slide 19: Beyond the Backlog
Beyond the Backlog Strong long-term fundamentals to drive additional opportunities Northeast natural Storage to support Infrastructure to gas demand and renewable power Grow crude and support U.S. Haynesville 2.0 long-term supply generation and NGL footprint energy exports needs LNG exports Market a
Slide 20: Committed to Being a Good Corporate Citizen
Committed to Being a Good Corporate Citizen Best-in-class safety & long-standing commitment to reducing methane emissions In large part due to replacing coal-fired electricity generation with SUCCESSFUL METHANE EMISSIONS REDUCTIONS(a) natural gas, the U.S. has reduced emissions significantly Bcf, cu
Slide 21: Compelling Investment Opportunity
Compelling Investment Opportunity Returning value to shareholders via significant dividend growth | Attractive valuation DRILL-DOWN OF S&P 500 COMPANIES ENTERPRISE VALUE / 2020E EBITDA Attractive valuation provides upside potential 408 2020E Net Debt / 2020E EBITDA <5.0x 10.4x 11.3x 295 Investment g
Slide 22: Differentiated Performance versus Midstream Peers
Differentiated Performance versus Midstream Peers Not yet fully reflected in valuation 2019-2020 DIVIDEND GROWTH(a) 2019 EBITDA MULTIPLE(a) 25% 15.3x 12.2x 12.5x 10.8x 10.9x 11.1x 11.4x 9.9x 8.9x 11% 9% 9% 8% 8% 6% 4% 3% KMI WMB ENB CN OKE PAA TRP CN MPLX EPD ET ET PAA KMI MPLX WMB EPD TRP CN ENB CN
Slide 23: KMI: A Compelling Investment Opportunity
KMI: A Compelling Investment Opportunity Strategically-positioned assets generating substantial cash flow with attractive investment opportunities ► ~90% take-or-pay or fee-based earnings(a) ► ~$8 billion 2019B Adjusted EBITDA(b) ► 5% current dividend yield ► 25% dividend increase in 2020 ► Highly-a
Slide 24: Appendix
KINDER/MORGAN Appendix
Slide 25: KMI: 2019 Guidance – Published Budget
KMI: 2019 Guidance – Published Budget Strong fundamentals and strategic footprint support steady growth in our diversified, fee-based cash flow Key Metrics 2019 Budget ∆ from 2018 Notes SIGNIFICANT CASH GENERATION $ billions Expect to be slightly below budget, primarily $7.8 Adjusted EBITDA $7.8 bil
Slide 26: Distributable Cash Flow (DCF) versus Net Income
Distributable Cash Flow (DCF) versus Net Income Largest differences easily explainable and more reflective of cash earnings DEPRECIATION EXPENSE VS. SUSTAINING CAPEX(a) BOOK TAX EXPENSE VS. CASH TAXES $ billions $ billions $2.8 $2.8 $2.7 $2.7 $2.6 $2.4 $1.0 $1.0 $1.0 $2.2 $0.8 $0.7 $1.7 $0.7 $0.7 $1
Slide 27: Stable, Multi-Year Fee-Based Cash Flow
Stable, Multi-Year Fee-Based Cash Flow ~96% of 2019B segment cash flow is from take-or-pay and other fee-based contracts or hedged(a) 66% Fee-Based Take-or-Pay: highly dependable cash flow under multi-year contracts Entitled to payment regardless of throughput for periods of up to 20+ years 25% Ot
Slide 28: Energy Toll Road
Energy Toll Road Cash flow security with ~90% from take-or-pay and other fee-based contracts Natural Gas Pipelines Products Pipelines Terminals CO2 2019B EBDA %(a) 61% 15% 14% 10% 76% interstate pipelines(b) 78% liquids Asset Mix 60% refined products 61% terminals 62% oil production related 9% intra
Slide 29: Averaged $2.5 Billion of Discretionary Capital per Year
Averaged $2.5 Billion of Discretionary Capital per Year Since 2008 ANNUAL GROWTH CAPITAL & CONTRIBUTIONS TO JVs(a,b) $ billions Expansion Average $3.4 $3.3 $3.2 $3.2 $3.1 $3.0 $2.5 $2.7 $2.3 $2.3 $1.7 $1.4 $1.1 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019B (c) Established track record
Slide 30: Successfully Achieving Attractive Build Multiples
Successfully Achieving Attractive Build Multiples Disciplined steward of capital Competitive advantages: INVESTMENT MULTIPLES: PROJECTS COMPLETED 2015-2018 Capital invested / year 2 Project EBITDA(a) Expansive asset base ― ability to leverage Natural gas segment comprises or repurpose steel alread
Slide 31: Stable Foundation of Cash Flows through Commodity Cycles
Stable Foundation of Cash Flows through Commodity Cycles 5-year change in Adjusted EBITDA $ billions $1.7 $7.8 $7.4 $(0.6) $(0.5) $0.2 $(0.3) $(0.1) Helped to fund $8.3 billion Adjusted Net Debt reduction(b) 2014 Adjusted EBITDA 2014-2017 Asset Divestitures 2014-2017 2015-2016 Other EBITDA from 2019
Slide 32: Prioritizing Environmental, Social and Governance (ESG)
Prioritizing Environmental, Social and Governance (ESG) Multi-faceted approach to good corporate governance | On-going enhancements to disclosures CORPORATE GOVERNANCE ESG RESOURCES Disclosure: 13 independent out of 16 board members - 2017 ESG Report - Annual Meeting Proxy Statement 2 female board m
Slide 33: KMI Business Risks
KMI Business Risks Summary 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 – 2019 budget average strip price assumptions: $60.0
Slide 34: Joint Venture Treatment in Key Metrics
Joint Venture Treatment in Key Metrics KM controls and fully consolidates KM does not control or consolidate (third party portion referred to as noncontrolling interests in financial statements) (KM portion referred to as equity investments in financial statements) NGPL (50%), SNG (50%), FGT (50%),
Slide 35: Natural Gas Segment Overview
Natural Gas Segment Overview Connecting key natural gas resources with major demand centers Asset Summary Natural gas pipelines: ~70,000 Miles NGL pipelines: ~2,700 Miles U.S. natural gas consumption moved: ~40% Working gas storage capacity: 657 Bcf 2019B EBDA(a): ~$5.1 billion Project Backlog: $4.4
Slide 36: Manageable Natural Gas Re-Contracting Exposure
Manageable Natural Gas Re-Contracting Exposure Analysis of existing contract base (as of YE2018) EXPECTED ANNUAL NET RE-CONTRACTING EXPOSURE (KM SHARE): Assumptions % of $8.4bn 2019B Total Segment EBDA(a) Negative figures represent unfavorable re-contracting exposure based on November 2018 market
Slide 37: FERC-Regulated Interstate Natural Gas Assets
FERC-Regulated Interstate Natural Gas Assets Summary statistics, including remaining contract term and rate moratorium dates (where applicable) Transport Storage Avg. Remaining % of 2017 Revenues KM Capacity Capacity Contract Term from Negotiated or Rate Moratorium # Asset Name (Nickname) Ownership
Slide 38: Terminals Segment Overview
Terminals Segment Overview Diversified terminaling network connected to key refining centers and market hubs Asset Summary Total Kinder Morgan terminals: 157 Terminals Terminals segment – bulk 34 Terminals Terminals segment – liquids 56 Terminals Products Pipelines segment terminals 67 Terminals Jon
Slide 39: Products Segment Overview
Products Segment Overview Strategic footprint with significant cash flow generation Asset Summary Pipelines(a): ~9,500 Miles 2018 throughput(a) ~2.3 mmbbld Condensate processing capacity 100 mbbld Transmix 5 facilities Terminals: 67 Terminals Terminals tank capacity ~39 mmbbls Pipeline tank capacity
Slide 40: CO2 Segment Overview
CO2 Segment Overview World class, fully-integrated assets | CO2 source to crude oil production and takeaway in the Permian Basin KMI Remaining OGIP CO2 Reserves Interest NRI Location Deliverability (tcf) McElmo Dome 45% 37% SW Colorado 20+ years 22.0 Doe Canyon 87% 68% SW Colorado 10+ years 3.0 CO2
Slide 41: CO2 Free Cash Flow and Attractive Returns
CO2 Free Cash Flow and Attractive Returns Long history of generating high returns and significant CO2 free cash flow with minimal acquisitions CO2 IRR% 2000-2018 SIGNIFICANT CO2 FREE CASH FLOW $ millions $1,432 $1,458 EOR oil production 18% $1,326 $1,141 $1,094 $286 Total CO2 $960 Segment (incl. CO2
Slide 42: Non-GAAP Financial Measures and Reconciliations
Non-GAAP Financial Measures and Reconciliations Defined terms Reconciliations for historical periods 42
Slide 43: 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, Adjusted EBITDA, Adjusted Earnings, both in the aggregate and per share, and Net Debt and Adjusted Net Debt, and CO2 Free Cash
Slide 44: Use of Non-GAAP Financial Measures (Cont'd)
Use of Non-GAAP Financial Measures (Cont’d) Adjusted Earnings – Adjusted Earnings are calculated by adjusting net income available to common stockholders for Certain Items, and Adjusted Earnings per share is Adjusted Earnings divided by average adjusted common shares which include KMI’s weighted ave
Slide 45: KMI GAAP Reconciliation
KMI GAAP Reconciliation $ in millions Yr. Ended Yr. Ended Reconciliation of DCF 12/31/18 Reconciliation of Adjusted EBITDA 12/31/18 Net Income $ 1,919 Net Income $ 1,919 Noncontrolling interests (a) (310) Total Certain Items 501 Preferred stock dividends (128) Noncontrolling interests (h) (252) Net
Slide 46: Reconciliation of CO2 Free Cash Flow
Reconciliation of CO2 Free Cash Flow $ in millions Year Ended December 31, Reconciliation of CO2 Free Cash Flow 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Segment EBDA $ 783 $ 965 $ 1,099 $ 1,322 $ 1,435 $ 1,240 $ 657 $ 827 $ 847 $ 759 Certain items: Non-cash impairments and project write-off
Slide 47: Notes
A Notes: KINDER/MORGAN 47
Slide 48: Kinder Morgan
KINDERJMORGAN