10-QPeriod: Q2 FY2018

KINDER MORGAN, INC. Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 20, 2018For Securities:KMIEP-PC

Summary

Kinder Morgan, Inc. (KMI) reported a net loss of $141 million ($0.08 per share) for the second quarter of 2018, a significant reversal from a net income of $376 million ($0.15 per share) in the same quarter of the previous year. This loss was primarily driven by substantial impairment charges, including a $600 million non-cash impairment related to gathering and processing assets in Oklahoma, and a $270 million impairment on its equity investment in Gulf LNG Holdings Group, LLC. Total revenues saw a slight increase to $3.43 billion from $3.37 billion year-over-year, indicating resilient operational performance despite the significant impairment charges. Operationally, the company's Segment EBDA (Earnings Before Depreciation, Depletion, and Amortization) declined by 38% to $1.11 billion from $1.80 billion in the prior year's second quarter. This decline was most pronounced in the Natural Gas Pipelines segment, impacted by lower commodity prices and asset impairments. However, the company reaffirmed its intention to use the approximately $2 billion in after-tax proceeds expected from the sale of its Trans Mountain Pipeline (TMPL) and related assets to the Government of Canada to pay down debt. The company also repurchased approximately $250 million of its common stock during the period.

Financial Highlights

51 data points
Beta

Revenue

$3.43B

68.8% Gross Margin

Net Income

-$141.00M

-4.1% Net Margin

EPS (Diluted)

$-0.08

Total Assets

$78.31B

Cash & Equivalents

$271.00M

Free Cash Flow

$728.00M

Financial Statements
Beta
Revenue$3.43B
Cost of Revenue$1.07B
Gross Profit$2.36B
Operating Expenses$3.16B
Operating Income$272.00M
Net Income-$141.00M
EPS (Basic)$-0.08
Shares Outstanding (Basic)2.20B

Key Highlights

  • 1Net loss of $141 million ($0.08 per share) for Q2 2018, compared to net income of $376 million ($0.15 per share) in Q2 2017.
  • 2Significant impairment charges totaling $870 million ($600M for gathering/processing assets, $270M for equity investment in Gulf LNG).
  • 3Total revenues increased slightly to $3.43 billion in Q2 2018 from $3.37 billion in Q2 2017.
  • 4Segment EBDA decreased by 38% to $1.11 billion in Q2 2018 from $1.80 billion in Q2 2017, with Natural Gas Pipelines showing the largest decline.
  • 5Expects to use approximately $2 billion in after-tax proceeds from the sale of the Trans Mountain Pipeline to pay down debt.
  • 6Repurchased approximately $250 million of common stock during the first six months of 2018 under its share buyback program.
  • 7Revenues from contracts with customers was $3.32 billion for Q2 2018, slightly up from $3.29 billion in Q2 2017, reflecting stable operational demand.

Frequently Asked Questions

The primary reason for the substantial decrease in net income and the resulting net loss is the recognition of significant non-cash impairment charges. Kinder Morgan recorded a $600 million impairment for certain gathering and processing assets in Oklahoma and a $270 million impairment for its equity investment in Gulf LNG Holdings Group, LLC. These impairments, totaling $870 million, significantly impacted the company's profitability for the quarter.

Kinder Morgan intends to use the proceeds from the sale of the Trans Mountain Pipeline (TMPL) and related assets to the Government of Canada to pay down debt. The company expects to receive approximately $2 billion in after-tax proceeds from this transaction, which is anticipated to close in late Q3 or early Q4 2018.

The company adopted Topic 606 effective January 1, 2018. For the three months ended June 30, 2018, this adoption resulted in a reported decrease in total revenues by $134 million. The impact was primarily seen in the Natural Gas Pipelines and Products Pipelines segments. This change reflects a shift in how certain transactions, particularly those involving the purchase and sale of commodities where KMI acts as an agent or obtains control of only a portion of the commodities, are recognized.

Total debt remained relatively stable, standing at $36.9 billion as of June 30, 2018, compared to $36.9 billion as of December 31, 2017. The current portion of debt decreased from $2.83 billion to $2.13 billion, indicating a shift of some debt to longer maturities. The company also plans to use the proceeds from the Trans Mountain sale to further reduce debt.