Earnings are out and a small dividend increase:
HOUSTON--(BUSINESS WIRE)-- Kinder Morgan, Inc.’s (NYSE: KMI) board of directors today approved a cash dividend of $0.2875 per share for the first quarter ($1.15 annualized), payable on May 15, 2024, to stockholders of record as of the close of business on April 30, 2024. This dividend is a 2% increase over the first quarter of 2023.
The company is reporting:
- First quarter earnings per share (EPS) of $0.33 and distributable cash flow (DCF) per share of $0.64, up 10% and 5%, respectively, compared to the first quarter of 2023.
- Net income attributable to KMI of $746 million, compared to $679 million in the first quarter of 2023.
- DCF of $1,422 million for the quarter, compared to $1,374 million in the first quarter of 2023.
“The ongoing war in Ukraine and conflict in the Middle East have served to highlight to policy makers and the public at large the crucial role energy plays on the global stage. It has often been said that energy security is national security. Clearly the delivery of energy by companies located in stable countries that respect the rule of law is more important now than ever. We are proud to be one such company and are committed to serving our customers for many years to come,” said Executive Chairman Richard D. Kinder.
“Kinder Morgan has throughout our history been a leader in the midstream sector, developing an extensive, interconnected network of fee-based assets in the energy infrastructure space, and now with a growing footprint in the energy transition. The dividend declared this quarter represents the seventh consecutive year in which we have increased the dividend. In the first quarter we continued to internally fund high-quality capital projects while generating cash flow from operations of $1.2 billion and $570 million in free cash flow after capital expenditures,” Kinder concluded.
“The company got off to a strong start this quarter on increased financial contributions from our Natural Gas Pipelines, Products Pipelines and Terminals business segments, with Net income attributable to KMI up 10% and Adjusted EBITDA up 7% versus the first quarter of 2023,” said Chief Executive Officer Kim Dang.
“KMI’s balance sheet is strong, as we ended the quarter with a Net Debt-to-Adjusted EBITDA ratio of 4.1 times,” continued Dang.
“Notwithstanding the current low natural gas price environment, the future looks very bright for our Natural Gas Pipelines business segment. We expect demand for natural gas to grow substantially between now and 2030, led by more than a doubling of demand for liquefied natural gas (LNG) exports and a more than 50% increase in exports to Mexico. We are also anticipating significant new natural gas demand for electric generation associated with artificial intelligence operations, crypto currency mining and data centers, which would be additive to the growth discussed above,” continued Dang. “It’s also important to note that the Biden Administration’s 'pause' in approving LNG exports to non-Free Trade Agreement countries, while disappointing, will likely have no impact on our planned projects to support LNG exports.”
“Our project backlog at the end of the first quarter was $3.3 billion, up from $3 billion at year-end 2023. In calculating backlog Project EBITDA multiples, we exclude both the capital and EBITDA from CO2 enhanced oil recovery projects and our gathering and processing projects, where the earnings are more uneven than with our other business segments. To compensate for those uneven earnings profiles we require higher return thresholds for those projects. We expect the remaining $2 billion of projects in the backlog to generate an average Project EBITDA multiple of under 5.0 times.
“We are devoting nearly 80% of our project backlog to lower-carbon energy investments, including natural gas, renewable natural gas (RNG), renewable diesel (RD), feedstocks associated with RD and sustainable aviation fuel, as well as carbon capture and sequestration,” Dang concluded.
2024 Outlook
For 2024, including contributions from the acquired STX Midstream assets, KMI budgeted net income attributable to KMI of $2.7 billion ($1.22 per share), up 15% versus 2023, and expects to declare dividends of $1.15 per share for 2024, a 2% increase from the dividends declared for 2023. The company also budgeted 2024 DCF of $5 billion ($2.26 per share), and Adjusted EBITDA of $8.16 billion, both up 8% versus 2023, and to end 2024 with a Net Debt-to-Adjusted EBITDA ratio of 3.9 times.
The budget assumes average annual prices for West Texas Intermediate (WTI) crude oil and Henry Hub natural gas of $82 per barrel and $3.50 per million British thermal unit (MMBtu), respectively, consistent with the forward curve extant during the company’s annual budget process.
“Although natural gas prices are expected to be significantly below budget for the full year, given that we have modest direct commodity price exposure and have seen strong execution across our businesses, there’s no change to our full year budget guidance,” said Dang.
This press release includes Adjusted Net income attributable to KMI and DCF, in each case in the aggregate and per share, Adjusted Segment EBDA, Adjusted EBITDA, Net Debt, FCF (free cash flow), and Project EBITDA, all of which are non-GAAP financial measures. For descriptions of these non-GAAP financial measures and reconciliations to the most comparable measures prepared in accordance with generally accepted accounting principles, please see “Non-GAAP Financial Measures” and the tables accompanying our preliminary financial statements.
Overview of Business Segments
“The Natural Gas Pipelines business segment’s financial performance was up in the first quarter of 2024 relative to the first quarter of 2023, largely due to higher margins realized on our storage assets and higher volumes on our gathering systems, as well as additional contributions from our recent STX Midstream acquisition,” said KMI President Tom Martin.
“Natural gas transport volumes were up 2% compared to the first quarter of 2023. Natural gas gathering volumes were up 17% from the first quarter of 2023, primarily from our Haynesville and Eagle Ford gathering systems.
“Contributions from the Products Pipelines business segment were up compared to the first quarter of 2023 due to higher rates on existing assets and contributions from new capital projects. Total refined products and crude and condensate volumes were down slightly compared to the first quarter of 2023,” Martin said.
“Terminals business segment earnings were up compared to the first quarter of 2023. Increased contributions from liquids terminals expansion projects and higher rates on our Jones Act tankers were partially offset by lower petroleum coke volumes resulting from several refinery turnarounds and unplanned outages. The Jones Act fleet remains fully contracted under term charter agreements,” continued Martin.
“CO2 business segment earnings were down compared to the first quarter of 2023, primarily due to lower CO2 sales volumes, which were down 7% on a net-to-KMI basis compared to the first quarter of 2023. Price movements across our three primary commodities roughly offset one another,” said Martin. “Growth in NGL sales volumes was offset by lower crude volumes.”
Other News
Corporate
- KMI is adjusting its long-term leverage target from around 4.5 times Net Debt-to-Adjusted EBITDA to a range of 3.5 to 4.5 times. This is consistent with how we have operated over the past several years. We believe this target range is appropriate over the long term given our significant scale and high-quality energy infrastructure assets which produce stable, fee-based cash flows backed by multi-year contracts.
- In January 2024, KMI issued $1.25 billion of 5.00% senior notes due February 2029 and $1.00 billion of 5.40% senior notes due February 2034 to repay outstanding commercial paper (mainly incurred for the acquisition of STX Midstream), maturing debt and for general corporate purposes. The rates on the notes were favorable compared to budgeted rates.
Natural Gas Pipelines
- Construction is nearly complete on KMI’s project to expand the working gas storage capacity at its Markham Storage facility (Markham) in Matagorda County along the Texas Gulf Coast. The project adds an additional cavern at Markham to provide more than 6 billion cubic feet (Bcf) of incremental working gas storage capacity and 650 million cubic feet per day (MMcf/d) of incremental withdrawal capacity on KMI’s extensive Texas intrastate system. Shippers have subscribed to all of the available capacity under long-term agreements. Partial commercial service began last November, with full commercial service expected in June 2024.
- Construction activities continue for Tejas’ approximately $97 million South Texas to Houston Market expansion project. The project will add compression on Tejas’ mainline to increase natural gas deliveries by approximately 0.35 Bcf/d to Houston markets. The target in-service date is the first quarter of 2025.
- Construction is underway on an approximately $180 million expansion of the KMTP system to provide transportation and treating services to lean Eagle Ford producers in Webb County. The expansion project, supported by a long-term contract, is designed to deliver up to 500 MMcf/d of Eagle Ford natural gas supply into our Intrastate network. The project is currently on track to be placed in service in November 2024.
- Construction has begun on both phases of the Evangeline Pass project. The two-phase $673 million project involves modifications and enhancements to portions of the Tennessee Gas Pipeline and Southern Natural Gas systems in Mississippi and Louisiana, which will result in the delivery of approximately 2 Bcf/d of natural gas to Venture Global’s proposed Plaquemines LNG facility. The expected in-service date for phase 1 is July 1, 2024, while the expected in-service date for phase 2 is July 1, 2025.
- TGP has executed long-term contracts to support its approximately $63 million Muskrat project. The Muskrat project is designed to deliver up to 225 MMcf/d of supply to the Southeast markets. The project includes modifications to TGP’s existing compression and auxiliary facilities and is expected to be in service on August 1, 2025.
Terminals
- Civil and tank foundation work continues on KMI’s latest expansion of its industry-leading RD and sustainable aviation fuel feedstock storage and logistics offering in its lower Mississippi River hub. The scope of work at its Geismar River Terminal in Geismar, Louisiana includes construction of multiple tanks totaling approximately 250,000 barrels of heated storage capacity as well as various marine, rail and pipeline infrastructure improvements. The approximately $54 million Geismar River Terminal project, which is supported by a long-term commercial commitment, is expected to be in service by the fourth quarter of 2024.
Energy Transition Ventures
- Construction continues on the previously announced conversion of the Autumn Hills, Michigan, landfill gas-to-electric facility to an RNG facility. The RNG facility is expected to be placed in service in the fourth quarter of 2024 with a capacity of 0.8 Bcf of RNG annually. Once complete and in service, this additional facility will bring KMI’s total RNG generation capacity to 6.9 Bcf per year.
- On April 12, Kinder Morgan Energy Transitions Ventures (ETV) group and TGS Cedar Port Partners, LP executed a pore space lease agreement composed of approximately 10,800 acres near the Houston Ship Channel, with total CO2 storage capacity in excess of 300 million tonnes. This lease will give ETV a geographically and geologically advantaged platform to develop CO2 sequestration solutions for nearby sources of emissions.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy infrastructure companies in North America. Access to reliable, affordable energy is a critical component for improving lives around the world. We are committed to providing energy transportation and storage services in a safe, efficient and environmentally responsible manner for the benefit of the people, communities and businesses we serve. We own an interest in or operate approximately 79,000 miles of pipelines, 139 terminals, 702 billion cubic feet of working natural gas storage capacity and have renewable natural gas generation capacity of approximately 6.1 Bcf per year with an additional 0.8 Bcf in development. Our pipelines transport natural gas, refined petroleum products, crude oil, condensate, CO2, renewable fuels and other products, and our terminals store and handle various commodities including gasoline, diesel fuel, jet fuel, chemicals, metals, petroleum coke, and ethanol and other renewable fuels and feedstocks. Learn more about our work advancing energy solutions on the lower carbon initiatives page at www.kindermorgan.com.
Please join Kinder Morgan, Inc. at 4:30 p.m. ET on Wednesday, April 17, at www.kindermorgan.com for a LIVE webcast conference call on the company’s first quarter earnings. |
