01—Abstract
Summary
Summary of the 8-K filed April 17, 2024. Cited figures are marked; the original filing is the authoritative source.
Kinder Morgan (KMI) reported preliminary first-quarter 2024 results on April 17, 2024, with GAAP net income attributable to KMI of $746 milliona (vs. $679 million in Q1 2023), up 10%, and basic and diluted EPS of $0.33, up 10%.
Adjusted EPS rose 13% to $0.34b and Adjusted EBITDA rose 7% to $2.14 billion. Distributable cash flow (DCF) was $1.42 billion, or $0.64 per share, up 5%. Cash flow from operations was $1.2 billion and free cash flow after capital expenditures was $570 million, though FCF after dividends was negative $61 million for the quarter.
The board approved a quarterly dividend of $0.2875c per share ($1.15 annualized), a 2% increase, payable May 15, 2024. The quarter was driven by higher Natural Gas Pipelines margins (storage and gathering volumes, with gathering up 17%, partly from the STX Midstream acquisition), higher Products Pipelines rates, and better Terminals results. CO2 segment earnings declined on lower net CO2 sales volumes (down 7%).
Management reiterated full-year 2024 budget guidance of $2.7 billiond net income attributable to KMI ($1.22 per share), $5.0 billion DCF ($2.26 per share), and $8.16 billion Adjusted EBITDA, even though natural gas prices are expected to run well below budget. Balance sheet and strategy updates include a revised long-term leverage target of 3.5x to 4.5x Net Debt-to-Adjusted EBITDA (previously around 4.5x), a current ratio of 4.1x, and a year-end 2024 target of 3.9x.
Management said the project backlog grew to $3.3 billion, with nearly 80% devoted to lower-carbon investments, and that the Biden administration's LNG export pause is unlikely to affect planned projects. Note that these results are preliminary, and the filing contains non-GAAP measures that should be read alongside GAAP figures.
02—Key points
Key Highlights
- GAAP net income attributable to KMI of $746M (+10% YoY); EPS of $0.33 (+10%); Adjusted EPS of $0.34 (+13%).
- Adjusted EBITDA of $2.14B in Q1 2024, up 7% from $2.00B; DCF of $1.42B, or $0.64 per share (+5%).
- Quarterly dividend held at $0.2875 per share ($1.15 annualized), a 2% increase, the seventh consecutive annual increase.
- Free cash flow of $570M after capex, but FCF after dividends was negative $61M for the quarter, with dividends of $631M.
- Full-year 2024 budget reiterated: $2.7B net income ($1.22/share), $5.0B DCF ($2.26/share), $8.16B Adjusted EBITDA, despite weaker expected natural gas prices.
- Leverage target revised to 3.5x–4.5x Net Debt-to-Adjusted EBITDA; Q1 ratio at 4.1x, with 3.9x targeted by year-end 2024.
- Project backlog grew to $3.3B from $3.0B at year-end 2023, with nearly 80% devoted to lower-carbon energy investments.
03—Questions
Frequently Asked Questions
Did Kinder Morgan meet expectations in Q1 2024?
The filing reports growth across the key metrics: net income attributable to KMI rose 10%, adjusted EPS rose 13%, and Adjusted EBITDA rose 7%. Because the results are preliminary and the filing does not include analyst consensus, whether they beat or missed expectations cannot be determined from this document alone.
Is the dividend safe, and is it growing?
The quarterly dividend of $0.2875 is 2% above the Q1 2023 level and marks the seventh consecutive year of increases. The Q1 DCF of $1.42B covered dividends paid of $631M by more than 2x, although FCF after dividends was negative for the quarter because of elevated capital spending.
What is the outlook for 2024?
Management reaffirmed its full-year budget: $2.7B net income attributable to KMI, $5.0B DCF, and $8.16B Adjusted EBITDA. The budget assumes WTI at $82/bbl and Henry Hub gas at $3.50/MMBtu. Management says natural gas prices will be well below budget, but it expects modest direct commodity exposure to limit the impact.
How is KMI's leverage changing?
Net debt was $31.9B at March 31, 2024, equal to 4.1x Adjusted EBITDA. KMI revised its long-term target to 3.5x–4.5x, which is consistent with recent operations, and expects to end 2024 at 3.9x. Net debt rose from the STX Midstream acquisition, which closed December 28, 2023.
What are the main risks flagged in the filing?
The filing highlights weaker natural gas prices, lower CO2 sales volumes (down 7%), and the risk of a pause in LNG export approvals, which management says is unlikely to affect its projects. The filing also flags commodity prices, counterparty risk, and the factors listed in its 10-K. Short-term debt fell to $2.0B from $4.0B as commercial paper was refinanced with fixed-rate notes.
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