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Kinder Morgan Q3 Earnings Update

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Kinder Morgan’s board of directors has approved a cash dividend of $0.2775 per share for the third quarter ($1.11 annualised), payable on November 15, 2022, to stockholders of record as of the close of business on October 31, 2022. This dividend is a 3 percent increase over the third quarter of 2021.

The company is reporting third quarter net income attributable to KMI of $576 million, compared to net income attributable to KMI of $495 million in the third quarter of 2021 and distributable cash flow (DCF) of $1,122 million, compared to $1,013 million in the third quarter of 2021. Adjusted Earnings were $575 million for the quarter, versus $505 million in the third quarter of 2021.

“As we continue to witness the tragic consequences of the war in Ukraine, including global economic turbulence and volatility, our company and the US energy sector as a whole can take some measure of pride in continuing to provide both our citizens and those around the world with natural gas, refined products and crude oil,” said executive chairman Richard D Kinder.

“The great work of more than 10,000 Kinder Morgan employees has contributed to another strong quarter, as we generated robust earnings and strong coverage of this quarter’s dividend. As always, the company remains steadfast in our long-standing goals: to maintain a strong investment-grade balance sheet, internally fund expansion opportunities, pay an attractive and growing dividend, and further reward our shareholders by repurchasing our shares on an opportunistic basis.”

“The company continues to perform better than budget, well above DCF plan for the quarter,” said chief executive officer Steve Kean.

“Our Natural Gas Pipelines segment continues to see strong demand for the extensive firm transport and storage services we offer, as well as favourable contract renewals on multiple assets across our network. We are also moving forward with projects to provide additional transport capacity to liquefied natural gas (LNG) facilities and remain focused on continuing to be the provider of choice for that growing market. Given the proximity of our existing assets to planned LNG expansions, we expect to maintain and potentially expand on our approximately 50 percent share of transport capacity to LNG export facilities.

“Domestically, we are seeing the market highly value our 700 billion cubic feet (Bcf) of working natural gas storage capacity,” continued Kean. “Our customers are increasingly recognising the role storage must play in an energy system that requires flexible deliverability as the contribution from intermittent renewable sources continues to grow in the power sector.

“There is simply no question that the assets we operate and the services we provide will be needed for a long time to come. Similarly, it is indisputable that a lengthy transition to greater deployment of low carbon energy sources is underway — and we are responding to that. As we look ahead, roughly 80 percent of our project backlog is in lower-carbon energy services, including natural gas, renewable natural gas, renewable diesel and feedstocks associated with renewable diesel and sustainable aviation fuel,” Kean concluded.

“Our financial performance during the quarter was strong, as we generated earnings per share of $0.25 and DCF per share of $0.49,” said KMI president Kim Dang. “Earnings per share for the quarter were up 14 percent and DCF per share was up 11 percent as compared to the third quarter of 2021, and DCF per share was also up 7 percent versus budget. We generated $492 million of excess DCF above our declared dividend during the quarter.

“During the quarter, we took several steps to increase value for our shareholders, including progressing expansion projects and selling a 25.5 percent equity interest in Elba Liquefaction Company, (ELC) for approximately $565 million, which implies an approximately 13 times enterprise value to EBITDA multiple,” continued Dang.

“We used those proceeds to reduce short-term debt and create additional capacity for attractive investments, including opportunistic share repurchases. Regarding share repurchases, year-to-date through October 18 we have repurchased approximately 21.7 million shares at an average price of $16.94 per share.”

For the first nine months of 2022, the company reported net income attributable to KMI of $1,878 million, compared to $1,147 million for the first nine months of 2021 and DCF of $3,753 million, down 14 percent from $4,367 million for the comparable period in 2021.
Net income is up in 2022 in part due to a non-cash impairment charge taken in 2021. The DCF decrease compared to the prior period is due primarily to nonrecurring earnings during the February 2021 winter storm. Without the Uri impact, DCF for the first nine months is up 15 percent versus the prior year period.

For 2022, KMI budgeted to generate net income attributable to KMI of $2.5 billion and declare dividends of $1.11 per share, a 3 percent increase from the dividends declared for 2021. The company also budgeted to generate 2022 DCF of $4.7 billion and Adjusted EBITDA of $7.2 billion and to end 2022 with a Net Debt-to-Adjusted EBITDA ratio of 4.3 times.

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