Kinder Morgan (KMI) Announces 2023 Financial Expectations

Kinder Morgan, Inc. (NYSE: KMI) today announced its preliminary 2023 financial projections. “We expect 2023 to be another very good year for Kinder Morgan, with strong market fundamentals, continued robust growth in demand for existing and expanded natural gas transportation, storage, and gathering and processing; and continued demand for refined products midstream services and investments in our Energy Transition Ventures business,” said Steve Kean, KMI Chief Executive Officer. “Those results will be offset by the higher interest rate environment we expect in 2023. We anticipate generating net income attributable to KMI per share of $1.12, flat to our year-end 2022 forecast of $1.12 per share, with Adjusted EBITDA up 3% from 2022 at $7.7 billion, compared to the 2022 forecast of $7.5 billion. We anticipate total segment EBDA of $8.2 billion, up 5% compared to the 2022 forecast. We also expect to end 2023 with a Net Debt-to-Adjusted EBITDA ratio of 4.0 times, well below our long-term target of 4.5 times.”

“We expect distributable cash flow (DCF) per share of $2.13, down from our 2022 forecast of $2.17 DCF per share. We project interest expense to be significantly higher than our 2022 forecast, representing a DCF impact of approximately $0.15 per share. Absent that impact, expected DCF per share would be up 5% year over year,” said Kimberly Dang, KMI President. “Over the long-term, our corporate strategy of maintaining a portion (~25%) of our debt at a floating rate has been sound, saving the company approximately $1.2 billion over the last 10 years, far exceeding the expected 2023 impact.”

Below is a summary of KMI’s expectations for 2023:

• Generate $1.12 of net income attributable to KMI per share, flat to our current 2022 forecast of $1.12.
• Generate $2.13 DCF per share, down 1% from the current forecast for 2022 due to the impact of the projected increased interest expense discussed above.
• Generate $7.7 billion of Adjusted EBITDA, up 3% from the 2022 forecast; and total segment EBDA of $8.2 billion, up 5% from the 2022 forecast.
• Invest $2.1 billion in expansion projects and contributions to joint ventures, or discretionary capital expenditures (of which roughly 80% is in lower carbon projects).
• Return additional value to shareholders in 2023 through an anticipated $1.13 per share dividend (annualized) and opportunistic share repurchases.
• End 2023 with a Net Debt-to-Adjusted EBITDA ratio of 4.0 times, well below our long-term target of approximately 4.5 times.
• The expected $2.13 of DCF per share and the 4.0 times leverage metric do not reflect the impact of possible opportunistic share repurchases, which KMI will have substantial capacity to transact on.

Please see “Non-GAAP Financial Measures” below for definitions of DCF, Adjusted EBITDA and Net Debt, and the accompanying tables for reconciliations of 2023 budgeted net income attributable to KMI to budgeted DCF and budgeted Adjusted EBITDA.

KMI’s expectations assume average annual prices for West Texas Intermediate (WTI) crude oil and Henry Hub natural gas of $85 per barrel and $5.50 per MMBtu, respectively, consistent with forward pricing during the budget process. The vast majority of cash generated by KMI is fee-based and therefore is not directly exposed to commodity prices. The primary area where KMI has commodity price sensitivity is in its CO2 segment, where KMI hedges the majority of its next 12 months of oil production to minimize this sensitivity. For 2023, the company estimates that every $1 per barrel change in the average WTI crude oil price impacts DCF by approximately $9.1 million and each $0.10 per MMBtu change in the price of natural gas impacts DCF by approximately $1.3 million.

The KMI board of directors has preliminarily reviewed the 2023 budget and will take formal action on it at the January board meeting. Management will discuss the budget in detail during the company’s annual investor day conference on January 25, 2023, in Houston, Texas. The 2023 budget will be the standard by which KMI measures its performance next year and will be a factor in determining employee compensation. Kinder Morgan remains committed to transparency and will continue to publish its budget on the company’s website as presented at the investor day conference. An investor presentation updated with a brief overview of the 2023 budget has been posted to the Investor Relations page of KMI’s website.

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