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Kinder Morgan outlines preliminary 2014 financial projections

By Bob Downing Published: December 4, 2013

From Kinder Morgan on Tuesday:

 

Kinder Morgan Announces 2014 Financial Expectations

HOUSTON--(BUSINESS WIRE)--Dec. 3, 2013-- Kinder Morgan today announced its preliminary 2014 projections for Kinder Morgan, Inc. (NYSE: KMI), Kinder Morgan Energy Partners, L.P. (NYSE: KMP), Kinder Morgan Management, LLC (NYSE: KMR) and El Paso Pipeline Partners, L.P. (NYSE: EPB). Chairman and CEO Richard D. Kinder stated, “We anticipate strong growth in 2014 across the Kinder Morgan family of companies. We currently have identified approximately $14.4 billion in expansion and joint venture investments that we are confident will contribute to our growth, and we are pursuing customer commitments for many more projects.” Kinder Morgan owns and operates a large, diversified portfolio of primarily fee-based energy assets across North America that historically have produced substantial cash flow in virtually all types of market conditions.

KMI expects to declare dividends of $1.72 per share for 2014. This represents an approximate 10 percent increase over KMI’s 2013 budget target of $1.57 per share and an approximate 8 percent increase over the $1.60 per share of dividends it expects to declare for 2013. Growth at KMI in 2014 is expected to be driven by continued strong performance at KMP and contributions from EPB. The growth at KMI from KMP and EPB will be partially offset by the loss of income from the 2013 and expected 2014 sales (dropdowns) of certain assets to KMP and EPB. Subject to appropriate board approvals, KMI expects to drop down its 50 percent interest in Ruby Pipeline, its 50 percent interest in Gulf LNG and its 47.5 percent interest in Young Gas Storage to EPB during 2014.

KMP expects to declare cash distributions of $5.58 per unit for 2014, an approximate 6 percent increase over its 2013 budget target of $5.28 per unit and an approximate 5 percent increase above its current expectation of $5.33. (KMR also expects to declare distributions of $5.58 per share for 2014 and the distribution to KMR shareholders will be paid in the form of additional KMR shares.)

“We see exceptional growth opportunities across all of KMP’s business segments, including the need for more midstream infrastructure to move and store oil, gas and liquids from the prolific shale plays in the United States and the oilsands in Alberta, along with increasing demand for CO2,” Kinder said.

In 2014, KMP expects to:

  • Generate approximately $6.4 billion in business segment earnings before DD&A (adding back KMP’s share of joint venture DD&A), an increase of approximately $750 million over the 2013 forecast.
  • Distribute over $2.5 billion to its limited partners.
  • Invest approximately $3.6 billion in expansions (including contributions to joint ventures) and small acquisitions. Almost $720 million of the equity required for this investment program is expected to be funded by KMR share dividends.

KMP’s expectations assume an average West Texas Intermediate (WTI) crude oil price of approximately $96.15 per barrel in 2014, which approximated the forward curve at the time this budget was prepared. The overwhelming majority of cash generated by KMP’s assets is fee based and is not sensitive to commodity prices. In its CO2 segment, the company hedges the majority of its oil production, but does have exposure to unhedged volumes, a significant portion of which are natural gas liquids. For 2014, the company expects that every $1 change in the average WTI crude oil price per barrel will impact the CO2 segment by approximately $8 million, or approximately 0.125 percent of KMP’s combined business segments’ anticipated segment earnings before DD&A.

EPB expects to declare cash distributions of $2.60 per unit for 2014, an approximate 2 percent increase over its 2013 expected distribution of $2.55 per unit. EPB’s 2014 budget includes the expected purchase (dropdown) from KMI of 50 percent of Ruby Pipeline, 50 percent of Gulf LNG and 47.5 percent of Young Gas Storage. The positive impact from the expected dropdowns at attractive multiples will be largely offset by the impacts of the Southern Natural Gas and Wyoming Intestate Company (WIC) rate cases and expected lower rates on contract renewals on the WIC system. In 2014, EPB expects its regulated pipeline and storage assets, along with its LNG business, to generate earnings before DD&A of almost $1.3 billion (adding back EPB’s share of joint venture DD&A), an increase of almost $90 million compared to 2013. EPB also has over $1 billion of expansion projects under contract with customers, which will benefit EPB unitholders in 2016 and beyond.

The boards of directors will review and approve the 2014 Kinder Morgan budgets at the January board meeting and the budgets will be discussed in detail during the company’s annual analyst meeting on Jan. 29, 2014, in Houston. Kinder Morgan remains committed to transparency and will continue to publish its budgets on the company’s web site, www.kindermorgan.com. The 2014 budget will be the standard by which KMI, KMP, KMR and EPB measure their performance next year, and will be a target for determining employee bonuses.

Kinder Morgan is the largest midstream and the fourth largest energy company in North America with a combined enterprise value of approximately $105 billion. It owns an interest in or operates approximately 82,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel. Kinder Morgan, Inc. (NYSE: KMI) owns the general partner interest of Kinder Morgan Energy Partners, L.P. (NYSE: KMP) and El Paso Pipeline Partners, L.P. (NYSE: EPB), along with limited partner interests in KMP and EPB and shares in Kinder Morgan Management, LLC (NYSE: KMR). For more information please visit www.kindermorgan.com.

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