Kinder Morgan Declares $0.125 Dividend

By Joseph R. Fonseca January 19, 2017

Kinder Morgan announced that its board of directors approved a cash dividend of $0.125 per share for the quarter ($0.50 annualized) payable on Feb. 15, 2017, to common shareholders of record as of the close of business on Feb. 1, 2017.

KMI declared dividends of $0.50 per share for 2016 and used cash in excess of dividend payments to fully fund growth investments and strengthen its balance sheet.

Richard D. Kinder, executive chairman, said, “We are pleased to have reached significant milestones on two of our largest growth projects. We received approval from the Canadian federal government and the province of British Columbia to proceed with our Trans Mountain expansion project, and we also began construction on our Elba Island Liquefaction project. These are signature energy infrastructure assets for North America, and we expect they will contribute greatly to Kinder Morgan (KMI)’s growth in the future.”

“For the year, we substantially reduced our debt, further positioning Kinder Morgan for long-term value creation. We finished ahead of our plan for 2016 year-end leverage, and we are pleased with the progress toward reaching our targeted leverage level of around 5.0 times net debt-to-Adjusted EBITDA,” said Kinder. “This will position us to return substantial value to shareholders through some combination of dividend increases, share repurchases, additional attractive growth projects or further debt reduction. We are also seeing green shoots in our sector, based on the expected balancing of global crude oil supply and demand combined with expectations for a more positive federal legislative and regulatory environment. Overall, we are very confident about Kinder Morgan’s future.”

President and CEO Steve Kean said, “We are pleased with our operational performance for the quarter, which contributed to full year 2016 results that were in line with our guidance provided since April. We generated full year 2016 distributable cash flow in excess of our dividends and growth capital expenditures, and did not access the capital markets to fund growth projects. We continue to demonstrate the resiliency of our cash flows, generated by our large, diversified portfolio of predominately fee-based assets. We generated earnings per common share for the quarter of $0.08 and distributable cash flow of $0.51 per common share, resulting in $867 million of excess distributable cash flow above our dividend.”

Kean added, “We continue to drive future growth by completing significant infrastructure development projects in our project backlog. Our current project backlog is $12.0 billion, down from $13.0 billion at the end of the third quarter of 2016. This reduction was primarily driven by the completion of our Southern Natural Gas pipeline (SNG) and Elba Express Company (EEC) expansions, our South System Flexibility project and our Cortez Pipeline expansion, as well as the delivery of the American Endurance tanker. Excluding the CO2 segment projects, we expect the projects in our backlog to generate an average capital-to-EBITDA multiple of approximately 6.7 times.”

KMI reported fourth quarter net income available to common stockholders of $170 million, compared to a net loss available to common stockholders of $721 million for the fourth quarter of 2015, and distributable cash flow of $1,147 million versus $1,233 million for the comparable period in 2015. The decrease in distributable cash flow for the quarter was attributable to lower contributions from SNG as a result of a 50 percent sale of the pipeline during the third quarter of 2016 (which helped improve KMI’s leverage metrics) and from the CO2 segment primarily due to lower realized crude oil prices and lower volumes, partially offset by higher contributions from the Terminals and Products Pipelines segments. Net income available to common stockholders was also impacted by a $988 million favorable change in total certain items compared to the fourth quarter of 2015. Although the majority of Ruby Pipeline’s capacity is contracted until 2021, this quarter included a $250 million write down of the company’s equity investment in the pipeline, driven by a delay in expected west coast natural gas demand growth to beyond 2021. Fourth quarter 2015 certain items included a goodwill impairment of $1,150 million.

For the full year, KMI reported net income available to common stockholders of $552 million, compared to $227 million for 2015, and distributable cash flow of $4,511 million versus $4,699 million for 2015. The decrease in distributable cash flow was primarily attributable to lower contributions from the CO2 segment, lower contributions from SNG as a result of a 50 percent sale of the pipeline and a full year impact of preferred stock dividends, partially offset by increased contributions from the Terminals and Products Pipelines segments and lower interest expense. Net income available to common stockholders was further impacted by a $508 million favorable change in total certain items compared to 2015. In addition to the fourth quarter certain items described above, 2016 included a partial write down of the company’s equity investment in Midcontinent Express Pipeline (MEP).