Kinder Morgan Declares Dividend of $0.125 for Third Quarter of 2017

Remains on Track to Return Value to Stockholders in 2018

HOUSTON–(BUSINESS WIRE)–$KMI #KinderMorgan–Kinder Morgan, Inc. (NYSE: KMI) today announced that its board of
directors approved a cash dividend of $0.125 per share for the third
quarter ($0.50 annualized) payable on November 15, 2017, to common
stockholders of record as of the close of business on October 31, 2017.
KMI continues to expect to declare dividends of $0.50 per share for 2017
before increasing the dividend to $0.80 per share for 2018 ($0.20 per
share for Q1 2018). KMI also continues to expect to use cash in excess
of dividend payments to fully fund growth investments, further
strengthening its balance sheet.

“We remain on track to return increasing value to stockholders in 2018
through the combination of an attractive and growing dividend as well as
the share repurchase program we announced last quarter. Our goal of
maintaining robust dividend coverage while delivering a substantial
dividend increase to stockholders out of operating cash flows in excess
of growth capital remains clearly in sight,” said Richard D. Kinder,
executive chairman.

“At the same time, we continue the important work of strengthening our
balance sheet, continuing to fund all growth capital through operating
cash flows with no need for external funding for growth capital,” said
Kinder. “We continue to expect to end 2017 at a 5.2 times Net
Debt-to-Adjusted EBITDA ratio, lower than our budget, and are confident
of achieving our longer term leverage target of approximately 5.0 times.
We are extremely pleased with the company’s financial strength and
operational excellence.”

President and CEO Steve Kean said, “We had a solid third quarter,
especially in the face of multiple named storms, including a historic
rainfall event associated with Hurricane Harvey. Hundreds of our
employees and their families were affected by these storms, but they and
the assets they operate proved resilient and strong. Our response was
robust and impacts on our customers and operations were minimized. We
generated earnings per common share for the quarter of $0.15 and
distributable cash flow (DCF) of $0.47 per common share, resulting in
$774 million of excess DCF above our dividend.”

Kean added, “We continue to drive future growth by completing
significant infrastructure development projects that we track as part of
our project backlog. Our current project backlog is essentially flat
quarter-to-quarter at $12.0 billion, with the small decrease primarily
due to projects going into service. Excluding the CO2 segment
projects, we expect the projects in our backlog to generate an average
capital-to-EBITDA multiple of approximately 6.8 times.”

KMI reported third quarter net income available to common stockholders
of $334 million, compared to a net loss available to common stockholders
of $227 million for the third quarter of 2016, and DCF of $1,055
million, down slightly from $1,081 million for the comparable period in
2016. The decrease in DCF was driven by: lower contributions from
Southern Natural Gas Company (SNG) as a result of the 50 percent sale of
SNG during the third quarter of 2016; reduced revenue due to Hurricane
Harvey; a contribution to KMI’s pension plan; a reduction in
contributions from KMI’s Canadian assets due to the successful second
quarter initial public offering (IPO) of Kinder Morgan Canada Limited
(KML); and higher sustaining capex. These reductions were partially
offset by lower interest expense and higher contributions from Tennessee
Gas Pipeline (TGP). Net income available to common stockholders was also
impacted by a $576 million favorable change in total Certain Items (as
described under “Non-GAAP Financial Measures” below) compared to the
third quarter of 2016. Third quarter 2016 Certain Items were driven in
part by an asset write-down in that quarter.

For the first nine months of 2017, KMI reported net income available to
common stockholders of $1,072 million, up substantially compared to $382
million for the first nine months of 2016, and DCF of $3,292 million
that was down from $3,364 million for the comparable period in 2016. The
decrease in DCF was driven by the sale of 50 percent of SNG, the impacts
of Harvey, the contribution to KMI’s pension plan, the KML IPO, and
higher sustaining capex, partially offset by lower interest expense and
lower general and administrative expenses. Net income available to
common stockholders was also impacted by a $764 million decrease in
total Certain Items compared to the first nine months of 2016. Certain
Items in the first nine months of 2016 were driven by an asset
write-down and project write-offs.

2017 Outlook

For 2017, KMI’s budget was set to declare dividends of $0.50 per common
share, achieve DCF of approximately $4.46 billion ($1.99 per common
share) and Adjusted EBITDA of approximately $7.2 billion. KMI also
budgeted to invest $3.2 billion in growth projects during 2017, to be
funded with internally generated cash flow without the need to access
equity markets, and to end the year with a Net Debt-to-Adjusted EBITDA
ratio of approximately 5.4 times.

As a result of the successful IPO of its Canadian assets and impacts
from Hurricane Harvey, KMI now expects to end the year with: a Net
Debt-to-Adjusted EBITDA ratio of approximately 5.2 times, as proceeds
from the KML IPO were used to pay down debt; growth capital investment
of $3.1 billion; and DCF less than 1 percent below budget. The $3.1
billion in growth capital does not include KML-related expansion capex
as KML is a self-funding entity and KMI does not anticipate making
further contributions. Excluding the full-year impacts of KMI’s sale of
a 30 percent interest in its Canadian assets in the IPO (approximately
$22 million) and Hurricane Harvey, DCF is forecasted to be on plan. KMI
estimates that Hurricane Harvey will have a 2017 DCF impact of
approximately $20 million, excluding repair costs that are treated as
Certain Items. KMI expects that these repair costs, both those incurred
in the third quarter and those expected to be incurred in the fourth
quarter, will largely be recovered from insurance proceeds. KMI does not
provide budgeted net income attributable to common stockholders (the
GAAP financial measure most directly comparable to DCF and Adjusted
EBITDA) due to the inherent difficulty and impracticality of predicting
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 of $53 per barrel and Henry Hub natural gas
of $3 per MMBtu, consistent with forward pricing during the company’s
budget process. The vast majority of cash KMI generates is fee-based and
therefore not directly exposed to commodity prices. The primary area
where KMI has commodity price sensitivity is in its CO2 segment,
with the majority of the segment’s next 12 months of oil and NGL
production hedged to minimize this sensitivity. The segment is currently
hedged for 34,200 barrels per day (Bbl/d) at $58.91/Bbl for the
remainder of the year, as well as 23,532 Bbl/d at $59.03/Bbl in 2018;
13,100 Bbl/d at $55.34/Bbl in 2019; 7,300 Bbl/d at $53.08/Bbl in 2020;
and 2,400 Bbl/d at $52.45/Bbl in 2021.

Overview of Business Segments

“The Natural Gas Pipelines segment’s performance for the third
quarter of 2017 relative to the third quarter of 2016 was impacted by
the third quarter 2016 sale of a 50 percent interest in SNG,
Harvey-related and other declines from reduced volumes on many of our
midstream gathering and processing assets, and a negative impact on our
Colorado Interstate Gas Company (CIG) pipeline tariff rates as a result
of a rate case settlement reached during 2016. The segment again
benefited from increased contributions from TGP driven by incremental
short-term capacity sales and projects placed in service; from the Elba
Express pipeline, resulting from the completion of an expansion project;
and from El Paso Natural Gas (EPNG) due to additional Permian capacity
sales and the completion of an expansion project,” Kean said.

Natural gas transport volumes were up 3 percent compared to the third
quarter of 2016, driven by higher throughput on the Texas Intrastate
Natural Gas Pipelines from incremental transportation contracts serving
Mexico and contracts going into effect after the third quarter of 2016,
as well as higher throughput on EPNG as noted above, and higher
throughput on Elba Express resulting from the expansion on that system.
The increases were partially offset by lower throughput on
TransColorado, due to lower Rockies production, on Cheyenne Plains due
to mild weather and fuel switching to coal, and on Citrus, also due to
mild weather. Natural gas gathering volumes were down 14 percent from
the third quarter of 2016 due primarily to Hurricane Harvey impacts and
to lower natural gas volumes on multiple systems gathering from the
Eagle Ford Shale and on the KinderHawk system.

Natural gas is critical to the American economy and to meeting the
world’s evolving energy and manufacturing needs. Objective analysts
project U.S. natural gas demand, including net exports of liquefied
natural gas (LNG) and net exports to Mexico, will increase by more than
30 percent to greater than 100 billion cubic feet per day (Bcf/d) by
2026. Of the natural gas consumed in the U.S., about 40 percent moves on
KMI pipelines. While a substantial majority of natural gas is consumed
in industrial, commercial and residential heating uses, KMI expects
future natural gas infrastructure opportunities will also be driven by
greater demand for gas-fired power generation across the country, LNG
exports, exports to Mexico, and continued industrial development,
particularly in the petrochemical industry. Compared to the third
quarter of 2016, natural gas deliveries on KMI pipelines to Mexico were
up 3 percent, and despite some reductions due to Hurricane Harvey,
deliveries to the Sabine Pass LNG facility increased by 37 percent.

“The CO2 segment was impacted by lower
commodity prices, as our realized weighted average oil price for the
quarter was $58.29 per barrel compared to $62.12 per barrel for the
third quarter of 2016,” Kean said. “Combined oil production across all
of our fields was down 1 percent compared to 2016 on a net to Kinder
Morgan basis. Third quarter 2017 net NGL sales volumes of 9.6 thousand
barrels per day (MBbl/d) were down 9 percent from 2016, due to lower
hydrocarbon content in the produced gas stream year over year.”

Combined gross oil production volumes averaged 52.9 MBbl/d for the third
quarter, down 1 percent from 53.7 MBbl/d for the same period last year.
SACROC’s third quarter gross production was 5 percent below third
quarter 2016 results but slightly above 2017 budget, and Yates gross
production was 4 percent below third quarter 2016 results and below
plan. Both decreases were partially driven by reallocating capital to
higher return projects with longer lead times. Third quarter gross
production from Katz, Goldsmith and Tall Cotton was 21 percent above the
same period in 2016, but below plan. Gross NGL sales volumes were 20
MBbl/d during the quarter, 8 percent below third quarter 2016.

“The Terminals segment earnings contributions were essentially
flat compared to the third quarter of 2016 despite several strategic
divestitures and operational disruptions associated with Hurricane
Harvey. Excluding these items, the segment’s earnings would have been
higher in the third quarter 2017 by approximately $20 million.

Growth in the liquids business during the quarter versus the third
quarter of 2016 was primarily driven by increased contributions from our
Jones Act tankers and also benefited from various expansions across our
network, including the Kinder Morgan Export Terminal, a 1.5
million-barrel liquids terminal development along the Houston Ship
Channel,” Kean said. A new-build Jones Act tanker, the American
Liberty, was placed on-hire with a major refiner in the third
quarter. All of KMI’s Jones Act tankers are contracted with major energy
customers under term charter agreements.

The bulk terminals contribution was down largely due to the impact of
certain non-core asset divestitures and disruptions to petcoke handling
operations servicing Gulf Coast refiners impacted by Hurricane Harvey,
while performance at our coal and steel handling operations continues to
benefit from stabilizing global market conditions.

“The Products Pipelines segment contributions were up compared
with third quarter 2016 performance due largely to increased throughput
on SFPP and Kinder Morgan Southeast Terminals,” Kean said.

Total refined products volumes were up 1 percent for the third quarter
versus the same period in 2016. Crude and condensate pipeline volumes
were significantly impacted by Hurricane Harvey, down 8 percent from the
third quarter of 2016.

Kinder Morgan Canada contributions were up in the third quarter
of 2017 compared to the third quarter of 2016 largely due to currency
translation gains on strengthening of the Canadian dollar. The business
also had higher capitalized equity financing costs (recognized in other
income) due to spending on the Trans Mountain expansion project. These
positives were partially offset by lower Washington state revenues and
timing of operating costs.

Kinder Morgan Canada Limited (KML) includes the Trans Mountain pipeline,
the Canadian portion of the Cochin pipeline, the Puget Sound and Trans
Mountain Jet Fuel pipelines, the Westridge marine and Vancouver Wharves
terminals in British Columbia as well as various crude oil loading
facilities in Edmonton, Alberta. KMI owns approximately 70 percent of
KML and KML’s results are consolidated in KMI financial statements and
reported on a 100 percent basis at the segment level.

Other News

Natural Gas Pipelines

• On Sept. 18, 2017, the Federal Energy Regulatory Commission (FERC)
  authorized the company to install its 10 modular liquefaction trains
  for the nearly $2 billion Elba Liquefaction Project at KMI’s existing
  Southern LNG Company facility at Elba Island near Savannah, Georgia.
  The federally approved liquefaction project is supported by a 20-year
  contract with Shell. Initial in-service is expected in mid-2018. Final
  units coming on line by mid-2019 will bring total liquefaction
  capacity to approximately 2.5 million tonnes per year of LNG,
  equivalent to approximately 350 million cubic feet per day of natural
  gas. Elba Liquefaction Company, L.L.C. (ELC), a KMI joint venture with
  EIG Global Energy Partners as a 49 percent partner, will own 10
  liquefaction units and other ancillary equipment comprising
  approximately 70 percent of the project. Certain other facilities
  associated with the project are 100 percent owned by KMI.
• On Aug. 18, 2017, the FERC issued a favorable environmental assessment
  for the approximately $240 million SNG Fairburn Expansion Project in
  Georgia. SNG is a joint venture equally owned by subsidiaries of KMI
  and Southern Company. The project is designed to provide approximately
  340,000 dekatherms per day (Dth/d) of incremental long-term firm
  natural gas transportation capacity into the Southeast market
  beginning in the fourth quarter of 2018.
• On July 28, 2017, the FERC issued Kinder Morgan Louisiana Pipeline
  (KMLP) an environmental assessment for its proposed project to provide
  600,000 Dth/d of capacity to serve Train 5 at Cheniere’s Sabine Pass
  LNG Terminal. The approximately $122 million KMLP project is expected
  to be placed into service in the fourth quarter of 2019.
• All critical path permits have been approved and significant work is
  underway on TGP’s Broad Run Expansion Project, which is expected to be
  placed in service in June 2018. The project will provide an
  incremental 200,000 Dth/d of firm transportation capacity along the
  same north-south path as the already in-service Broad Run Flexibility
  Project. Antero Resources was awarded a total of 790,000 Dth/d of
  15-year firm capacity under the two projects from a receipt point on
  TGP’s existing Broad Run Lateral in West Virginia to delivery points
  in Mississippi and Louisiana. Estimated capital expenditures for the
  combined projects total approximately $800 million.
• TGP’s approximately $128 million Susquehanna West Project was placed
  into commercial service ahead of schedule on Sept. 1, 2017. The
  project provides 145,000 Dth/d of additional capacity to an
  interconnection with National Fuel Supply in Potter County,
  Pennsylvania, and is fully subscribed by StatOil Natural Gas LLC.
• Construction is nearly complete on three TGP projects following
  required regulatory approvals. The following projects are expected to
  be placed into service in the fourth quarter of 2017:
  • The approximately $99 million Connecticut Expansion Project is
    fully subscribed and will provide 72,100 Dth/d of capacity for
    three local distribution company customers in the Northeast. The
    project is expected to be placed into service in November 2017.
  • The approximately $109 million Orion Project will provide 135,000
    Dth/d of capacity for three customers and is ahead of schedule.
    TGP has reached agreement with the project customers for early
    in-service which is anticipated as early as December 2017.
  • The approximately $59 million Triad Project will provide 180,000
    Dth/d of capacity for one customer and is ahead of schedule. TGP
    anticipates that the project facilities will be available for
    service in November 2017, with commercial contracts in service on
    June 1, 2018, as originally planned.
• On Oct. 4, 2017, Kinder Morgan Texas Pipeline (KMTP), DCP Midstream
  and an affiliate of Targa Resources Corp. announced they have signed a
  letter of intent with respect to the joint development of the proposed
  Gulf Coast Express Pipeline Project (GCX Project), which would provide
  an outlet for increased natural gas production from the Permian Basin
  to growing markets along the Texas Gulf Coast. The participation of
  the three parties involved with the GCX Project is subject to
  negotiation and execution of definitive agreements among KMTP, DCP
  Midstream and Targa. As part of the definitive agreements, Targa and
  DCP Midstream would commit significant volumes to the project,
  including certain volumes provided by Pioneer Natural Resources
  Company, a joint owner in Targa’s WestTX Permian Basin system. The
  capacity of the GCX Project is expected to be approximately 1.92 Bcf/d
  and would include a lateral into the Midland Basin to serve gas
  processing facilities owned by Targa as well as facilities owned
  jointly by Targa and Pioneer. The mostly 42-inch pipeline would
  traverse approximately 450 miles and be in service in the second half
  of 2019, pending final shipper commitments and a final investment
  decision by all three entities. Per the terms of the letter of intent,
  KMI would build, operate and own a 50 percent interest in the GCX
  Project, and DCP Midstream and Targa would each hold a 25 percent
  equity interest in the project.
• Natural Gas Pipeline of America LLC (NGPL) expects the FERC to issue a
  Certificate of Public Convenience and Necessity for NGPL’s
  approximately $212 million Gulf Coast Southbound Expansion Project by
  the end of the year. The project, which is fully subscribed under
  long-term contracts, is designed to transport 460,000 Dth/d of
  incremental firm transportation service from NGPL’s interstate
  pipeline interconnects in Illinois, Arkansas and Texas to points south
  on NGPL’s pipeline system to serve growing demand in the Gulf Coast
  area. The project is anticipated to be fully in service by the fourth
  quarter of 2018.
• NGPL and Wyoming Interstate Company, LLC (WIC) each submitted to the
  FERC an Offer of Settlement in separate proceedings pursuant to
  Section 5 of the Natural Gas Act. The presiding administrative law
  judge in both proceedings certificated the settlements as uncontested,
  and the companies expect FERC approval by the end of the year. As
  currently negotiated, the settlements would not have a material
  adverse impact on KMI’s results of operations or cash flows from
  operations.

CO2

• The approximately $66 million second phase of KMI’s Tall Cotton field
  project is more than 70 percent complete and is experiencing strong
  initial production results of over 900 Bbls/d of oil. Tall Cotton is
  the industry’s first greenfield Residual Oil Zone CO2
  project, marking the first time CO2 has been used for
  enhanced oil recovery in a field without a main pay zone. Total
  combined production from the first and second phases of the project
  currently exceeds 2,300 Bbls/d of oil.
• KMI continues to find high-return enhanced oil recovery projects in
  the current price environment across its robust portfolio of assets.

Terminals

• Construction continues at the Base Line Terminal, a 50-50 joint
  venture crude oil merchant storage terminal being developed in
  Edmonton, Alberta, Canada, by KML and Keyera. In the third quarter,
  on-site facility mechanical work was materially completed and
  significant progress was made on the off-site pipe rack and bridges
  required to connect the terminal with KML’s other Edmonton-area
  facilities, including its North 40, Edmonton South, and Edmonton Rail
  terminals. Commissioning of the 12-tank, 4.8 million barrel new-build
  facility, which is fully contracted with long-term, firm take-or-pay
  agreements with creditworthy customers, is expected to begin in the
  first quarter of 2018, with tanks phased into service throughout that
  year. KML’s investment in the joint venture terminal is approximately
  C$396 million, including costs associated with the construction of a
  pipeline segment funded solely by KML, with total spend to date of
  C$250 million and remaining spend in 2017 of C$33 million. The project
  is forecast to be on schedule and on budget.
• Work is nearing completion on the Pit 11 expansion project at KMI’s
  Pasadena terminal. The approximately $186 million project,
  back-stopped by long-term commitments from existing customers, adds
  2.0 million barrels of refined products storage to KMI’s best-in-class
  liquids storage hub along the Houston Ship Channel. Due to impacts
  from Hurricane Harvey, the company revised its tank commissioning
  schedule to place the first four tanks in-service by mid-November
  2017, with the balance expected to follow by the end of the year.
• On July 27, 2017, KMI’s American Petroleum Tankers (APT) took delivery
  of the American Liberty product tanker from Philly Shipyard,
  Inc. (PSI) and later in the third quarter placed the vessel on-hire
  pursuant to a term charter agreement with a major refiner. APT’s
  construction program at PSI is nearing completion with the final
  tanker scheduled for delivery in the fourth quarter of 2017, bringing
  APT’s best-in-class fleet to 16 vessels. The entire fleet, including
  each of the 330,000-barrel capacity and LNG conversion-ready new-build
  tankers, is fixed under charter with a major energy company.
• On July 21, 2017, KMI closed the sale of a 40 percent interest in the
  Deeprock Development (Deeprock) crude oil terminal in Cushing,
  Oklahoma to Tallgrass Terminals, LLC (Tallgrass Terminals), an
  affiliate of Tallgrass Energy Partners, LP (Tallgrass), for a purchase
  price of approximately $57 million. KMI retains an 11 percent
  membership interest in the 2.25-million-barrel facility, and Tallgrass
  Terminals (69 percent) and Deeprock Energy Resources (20 percent)
  remain joint venture partners.

Contacts

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

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