10-QPeriod: Q1 FY2015

KINDER MORGAN, INC. Quarterly Report for Q1 Ended Mar 31, 2015

Filed April 28, 2015For Securities:KMIEP-PC

Summary

Kinder Morgan, Inc. (KMI) reported its first quarter 2015 financial results, showcasing a challenging period marked by declining revenues primarily driven by lower commodity prices, particularly in the CO2 segment. Despite a notable revenue decrease from $4.05 billion to $3.60 billion year-over-year, KMI managed to increase Net Income Attributable to Kinder Morgan, Inc. from $287 million to $429 million. This improvement was largely due to a significant reduction in Net Loss Attributable to Noncontrolling Interests, largely a consequence of the 2014 merger transactions that consolidated several previously separate entities. The company also saw an increase in total assets to $86.16 billion, fueled by strategic acquisitions, notably Hiland Partners, LP and Vopak terminal assets, which added substantial goodwill and other intangibles to the balance sheet. Despite revenue headwinds, KMI demonstrated solid operational performance in its Terminals and Products Pipelines segments, while its Natural Gas Pipelines segment experienced a slight decline. The company's proactive approach to risk management through derivative contracts is evident, with significant hedging activities in place for energy commodities and interest rates. KMI also reaffirmed its commitment to shareholder returns, announcing a planned 15% increase in its 2015 dividend per share, signaling confidence in its future cash flow generation capabilities despite the prevailing market conditions.

Financial Highlights

47 data points
Beta

Revenue

$3.60B

69.7% Gross Margin

Net Income

$429.00M

11.9% Net Margin

EPS (Diluted)

$0.20

Total Assets

$86.16B

Cash & Equivalents

$259.00M

Free Cash Flow

$359.00M

Financial Statements
Beta
Revenue$3.60B
Cost of Revenue$1.09B
Gross Profit$2.51B
Operating Expenses$2.52B
Operating Income$1.08B
Net Income$429.00M
EPS (Diluted)$0.20
Shares Outstanding (Diluted)2.15B

Key Highlights

  • 1Total Revenues decreased by approximately 11% to $3.60 billion from $4.05 billion in Q1 2014, largely due to lower commodity prices.
  • 2Net Income Attributable to Kinder Morgan, Inc. increased significantly by 49% to $429 million from $287 million in Q1 2014, primarily driven by the elimination of noncontrolling interests post-merger transactions.
  • 3The company completed significant acquisitions in Q1 2015, including Hiland Partners, LP and Vopak terminal assets, contributing to a rise in total assets to $86.16 billion.
  • 4Cash Flows from Operating Activities saw a 12% increase to $1.26 billion from $1.12 billion year-over-year, indicating strong operational cash generation.
  • 5Total debt increased to $41.82 billion in long-term debt from $40.25 billion, reflecting increased borrowings to fund acquisitions and other capital activities.
  • 6Kinder Morgan announced plans to increase its 2015 dividend per share by approximately 15% to $2.00, signaling confidence in future financial performance and commitment to shareholder returns.
  • 7The company incurred impairment charges totaling $77 million related to gas gathering and processing assets, reflecting the impact of the low commodity price environment.

Frequently Asked Questions

The primary reason for the decrease in revenues was the prevailing low commodity price environment, which significantly impacted the CO2 and Natural Gas Pipelines segments. Lower prices for natural gas, NGLs, and crude oil directly reduced revenue generated from sales and transportation activities.

The substantial increase in Net Income Attributable to Kinder Morgan, Inc. was primarily due to the significant reduction in 'Net Loss (Income) Attributable to Noncontrolling Interests.' This reduction was a direct result of the merger transactions completed in late 2014, which consolidated KMI's master limited partnerships (KMP and EPB) and Kinder Morgan Management, LLC. By owning a larger portion of these entities, the noncontrolling interests' share of earnings or losses decreased significantly.

In the first quarter of 2015, Kinder Morgan completed two significant acquisitions: Hiland Partners, LP for approximately $3.12 billion and Vopak's U.S. terminal assets for approximately $158 million. These acquisitions, funded in part by debt and equity, increased Kinder Morgan's total assets and contributed goodwill and other intangibles to the balance sheet. The acquired assets are integrated into the Natural Gas Pipelines, Products Pipelines, and Terminals segments.

Kinder Morgan expects to declare dividends of $2.00 per share on its common stock for 2015, representing an approximate 15% increase compared to the $1.74 per share declared in 2014. This planned increase signals the company's confidence in its ability to generate sufficient cash flow to support higher dividend payouts.