Kinder Morgan Announces 2018 Financial Expectations

HOUSTON–(BUSINESS WIRE)–Kinder Morgan, Inc. (NYSE: KMI) today announced its preliminary 2018
financial projections. “Through three tough years for the energy sector,
our business has proven robust and resilient,” said Steve Kean, KMI
President and CEO. “For 2018, we expect to generate $4.57 billion of
distributable cash flow (DCF).”

Below is a summary of KMI’s expectations for 2018:

• Generate $2.05 DCF per share and $7.5 billion of Adjusted EBITDA, up 3
  percent and 4.5 percent, respectively, compared to 2017, primarily due
  to projects placed into service during 2017 and 2018. Generating that
  level of DCF, after covering the planned 2018 dividend and budgeted
  discretionary spend (both discussed below) will leave in excess of
  $500 million to invest in additional high return projects or to
  repurchase shares.
• Enhance shareholder value in 2018 through the previously-announced
  dividend increase. As first stated in KMI’s second quarter 2017
  earnings release, KMI expects to increase the dividend per common
  share to $0.80 per share in 2018 ($0.20 per share for Q1 2018), a 60
  percent increase from the expected 2017 dividend. KMI also continues
  to expect to increase that dividend to $1.00 per share in 2019 and to
  $1.25 per share in 2020, a growth rate of 25 percent annually.
• Maintain a solid investment grade rating and end 2018 with a Net
  Debt-to-Adjusted EBITDA ratio of 5.1 times.
• Invest $2.2 billion on expansion projects and other discretionary
  spending in 2018, excluding growth capital and discretionary spending
  by Kinder Morgan Canada Limited, which is a self-funding entity. While
  KMI’s announced Gulf Coast Express project is not yet included in the
  company’s backlog, the budget does include an estimate of KMI’s share
  of 2018 spend on that project. As in previous years, KMI’s
  discretionary spending will be funded with excess, internally
  generated cash flow, with no need to access equity markets during 2018.
• Further enhance shareholder value through the previously-announced $2
  billion share buy-back program that was to begin in 2018. KMI’s Board
  of Directors has authorized the program to begin in December 2017. At
  current share prices, fully exercising the program would result in the
  buy-back of approximately 5 percent of KMI’s outstanding shares.
  Repurchases may be made by KMI from time to time in open-market or
  privately-negotiated transactions, including the potential use of
  10b5-1 programs, as permitted by securities laws and other legal
  requirements, and subject to market conditions and other factors.
  Under the repurchase program, there is no time limit for share
  repurchases, nor is there a minimum number of shares KMI intends to
  repurchase. The repurchase program may be suspended or discontinued at
  any time without prior notice.
• In order to prudently manage shareholder capital, the 2018 budget
  assumes Trans Mountain Expansion Project (TMEP) spending in the first
  part of 2018 is a “primarily permitting” strategy focused on advancing
  the permitting process, rather than spending at full construction
  levels, until KML has greater clarity on key permits, approvals and
  judicial reviews. We previously announced a potential delay to project
  completion of nine months (to September 2020) due primarily to the
  time required to file for, process and obtain necessary permits and
  regulatory approvals. Potential mitigation measures require obtaining
  greater clarity early in 2018 with respect to key permits, approvals
  and judicial reviews and continued planning with TMEP contractors to
  assess options to start or accelerate work in certain areas.
  • Construction delays entail increased costs due to a variety of
    factors including extended personnel, equipment and facilities
    charges, storage charges for unused material and equipment,
    extended debt service, and inflation, among others. Because those
    costs are highly uncertain at this stage of the project and the
    extent of a delay, if any, is currently unknown, Trans Mountain is
    not updating its cost estimate at this time.
  • In order to help achieve the necessary clarity with respect to
    permits and approvals, Trans Mountain has filed motions with the
    National Energy Board (NEB) to resolve existing delays and to
    establish an NEB process that will backstop provincial and
    municipal processes in a fair, transparent and expedited fashion.
    As stated in a November 14, 2017 motion presented to the NEB, “it
    is critical for Trans Mountain to have certainty that once
    started, the Project can confidently be completed on schedule.” If
    uncertainty around permitting and judicial processes extends
    further into 2018, TMEP would expect to reduce its 2018 budgeted
    spend and the previously announced unmitigated delay to a
    September 2020 in-service date could extend beyond September 2020.
    Further, as stated in the November 14 motion, if TMEP continues to
    be “faced with unreasonable regulatory risks due to a lack of
    clear processes to secure necessary permits . . . it may become
    untenable for Trans Mountain’s shareholders . . . to proceed.”
• KMI does not provide budgeted net income attributable to common
  stockholders (the GAAP financial measure most directly comparable to
  the non-GAAP financial measures distributable cash flow and Adjusted
  EBITDA) due to the impracticality of quantifying certain amounts
  required by GAAP such as ineffectiveness on commodity, interest rate
  and foreign currency hedges, unrealized gains and losses on
  derivatives marked to market, and potential changes in estimates for
  certain contingent liabilities.

KMI’s expectations assume average annual prices for West Texas
Intermediate (WTI) crude oil and Henry Hub natural gas of $56.50 per
barrel and $3.00 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 2018, the company
estimates that every $1 per barrel change in the average WTI crude oil
price impacts DCF flow by approximately $9 million and each $0.10 per
MMBtu change in the price of natural gas impacts DCF by approximately $1
million.

The KMI Board of Directors will review the 2018 budget for approval at
the January board meeting and the budget will be discussed in detail by
management during the company’s annual analyst meeting to be held on
January 24, 2018, in Houston, Texas. Kinder Morgan remains committed to
transparency and will continue to publish its budget on the company’s
website, www.kindermorgan.com.
The 2018 budget will be the standard by which KMI measures its
performance next year and will be a factor in determining employee
compensation.

Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy
infrastructure companies in North America. It owns an interest in or
operates approximately 84,000 miles of pipelines and 155 terminals.
KMI’s pipelines transport natural gas, refined petroleum products, crude
oil, condensate, CO2 and other products, and its terminals
transload and store petroleum products, ethanol and chemicals, and
handle steel, petroleum coke, and other products. It is also a leading
producer of CO2 that we and others use for enhanced oil
recovery projects primarily in the Permian basin. For more information
please visit www.kindermorgan.com.

Non-GAAP Financial Measures

The non-generally accepted accounting principles (non-GAAP) financial
measures of distributable cash flow (DCF), both in the aggregate and per
share, and Adjusted EBITDA are presented herein.

Certain Items, as used to calculate our Non-GAAP measures, are items
that are required by GAAP to be reflected in net income, but typically
either (1) do not have a cash impact (e.g., asset impairments), or (2)
by their nature are separately identifiable from our normal business
operations and in our view are likely to occur only sporadically (e.g.,
certain legal settlements, hurricane impacts and casualty losses).

DCF is calculated by adjusting net income available to common
stockholders before Certain Items for DD&A, total book and cash taxes,
sustaining capital expenditures and other items. DCF is a
significant performance measure useful to management and external users
of our financial statements in evaluating our performance and to measure
and estimate the ability of our assets to generate cash earnings after
servicing our debt and preferred stock dividends, paying cash taxes and
expending sustaining capital, that could be used for discretionary
purposes such as common stock dividends, stock repurchases, retirement
of debt, or expansion capital expenditures. We believe the GAAP measure
most directly comparable to DCF is net income available to common
stockholders. DCF per share is DCF divided by average outstanding
shares, including restricted stock awards that participate in dividends.

Adjusted EBITDA is calculated by adjusting net income before interest
expense, taxes, and DD&A (EBITDA) for Certain Items, noncontrolling
interests before Certain Items, and KMI’s share of certain equity
investees’ DD&A and book taxes. Adjusted EBITDA is useful to management
and external users to evaluate, in conjunction with our net debt,
certain leverage metrics. We believe the GAAP measure most directly
comparable to Adjusted EBITDA is net income available to common
stockholders.

Our non-GAAP measures should not be considered alternatives to GAAP
net income or other GAAP measures and have important limitations as
analytical tools. Our computations of non-GAAP measures may differ from
similarly titled measures used by others. You should not consider these
non-GAAP measures in isolation or as substitutes for an analysis of our
results as reported under GAAP. DCF should not be used as an alternative
to net cash provided by operating activities computed under GAAP.
Management compensates for the limitations of these non-GAAP measures by
reviewing our comparable GAAP measures, understanding the differences
between the measures and taking this information into account in its
analysis and its decision-making processes.

Important Information Relating to
Forward-Looking Statements

This news release includes forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995 and
Section 21E of the Securities and Exchange Act of 1934. Generally the
words “expects,” “believes,” anticipates,” “plans,” “will,” “shall,”
“estimates,” and similar expressions identify forward-looking
statements, which are generally not historical in nature. Forward-looking
statements are subject to risks and uncertainties and are based on the
beliefs and assumptions of management, based on information currently
available to them. Although KMI believes that these
forward-looking statements are based on reasonable assumptions, it can
give no assurance that any such forward-looking statements will
materialize. Important factors that could cause actual results to
differ materially from those expressed in or implied from these
forward-looking statements include the risks and uncertainties described
in KMI’s reports filed with the Securities and Exchange Commission
(SEC), including its most recent Annual Report on Form 10-K (under the
headings “Risk Factors” and “Information Regarding Forward-Looking
Statements” and elsewhere) and its subsequent reports, which are
available through the SEC’s EDGAR system at www.sec.gov
and on our website at ir.kindermorgan.com. Forward-looking
statements speak only as of the date they were made, and except to the
extent required by law, KMI undertakes no obligation to update any
forward-looking statement because of new information, future events or
other factors. Because of these risks and uncertainties, readers
should not place undue reliance on these forward-looking statements.

Contacts

Kinder Morgan, Inc.
Media Relations
Dave Conover, (713)
369-9407
[email protected]
or
Investor
Relations
(713) 369-9490
[email protected]
www.kindermorgan.com