Kinder Morgan (KMI) Issues FY13 Outlook; Expects 12% Increase in Dividend Rate

December 4, 2012 6:16 AM EST
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Kinder Morgan today announced its preliminary 2013 projections for Kinder Morgan, Inc. (NYSE: KMI), Kinder Morgan Energy Partners, L.P. (NYSE: KMP), Kinder Morgan Management, LLC (NYSE: KMR) and El Paso Pipeline Partners, L.P. (NYSE: EPB).

Chairman and CEO Richard D. Kinder stated, “We anticipate strong growth in 2013 across the Kinder Morgan family of companies. KMI’s growth is driven primarily by its ownership of the general partners of KMP and EPB. The majority of our assets resides at KMP and EPB. KMR is financially equivalent to KMP, but does not own any assets. Kinder Morgan primarily owns or operates a diversified portfolio of fee-based energy assets that generate substantial cash flow in virtually all types of market conditions. With our large footprint of midstream assets in North America, we are confident that Kinder Morgan is well positioned for future growth.”

KMI expects to declare dividends of $1.57 per share for 2013. This represents a 16 percent increase over KMI’s 2012 budget target of $1.35 per share and a 12 percent increase over the $1.40 per share of dividends it expects to declare for 2012. Growth at KMI in 2013 is expected to be driven by continued strong performance at KMP, along with contributions from EPB and the natural gas assets that KMI acquired in the El Paso Corporation transaction.

KMP expects to declare cash distributions of $5.28 per unit for 2013, a 6 percent increase over its 2012 budget target of $4.98 per unit, which it expects to meet. KMP’s 2013 budget projection includes the expected purchase (dropdowns) of 50 percent of El Paso Natural Gas Pipeline and a 50 percent stake in midstream assets from KMI, which would give KMP 100 percent ownership of these assets. (KMR also expects to declare distributions of $5.28 per share for 2013 and the distribution to KMR shareholders will be paid in the form of additional KMR shares.)

“We see exceptional growth opportunities across all of KMP’s business segments, including the need to build more midstream infrastructure to move or store oil, gas and liquids from the prolific shale plays in the U.S. and the oilsands in Alberta, along with increasing demand for export coal and CO2,” Kinder said.

In 2013, KMP expects to:

* Generate over $5.4 billion in business segment earnings before DD&A (adding back KMP’s share of joint venture DD&A), an increase of almost $900 million over the 2012 forecast.
* Distribute over $2 billion to its limited partners.
* Produce excess cash flow of more than $30 million above the distribution target of $5.28 per unit.
* Invest approximately $2.8 billion in expansions (including contributions to joint ventures) and small acquisitions (excluding the dropdowns from KMI). Over $625 million of the equity required for this investment program is expected to be funded by KMR dividends.

KMP’s expectations assume an average West Texas Intermediate (WTI) crude oil price of approximately $91.68 per barrel in 2013, which approximated the forward curve at the time this budget was prepared. The overwhelming majority of cash generated by KMP’s assets is fee based and is not sensitive to commodity prices. In its CO2 segment, the company hedges the majority of its oil production, but does have exposure to unhedged volumes, a significant portion of which are natural gas liquids. For 2013, the company expects that every $1 change in the average WTI crude oil price per barrel will impact the CO2 segment by approximately $8 million, or approximately 0.15 percent of KMP’s combined business segments’ anticipated segment earnings before DD&A.

EPB expects to declare cash distributions of $2.55 per unit for 2013, a 13 percent increase over its 2012 expected distribution of $2.25 per unit. EPB’s 2013 budget includes the expected purchase (dropdown) of 50 percent of Gulf LNG from KMI. EPB’s growth is expected to be driven by its stable, regulated natural gas pipeline and storage assets, its LNG businesses and incremental cost and growth synergies related to KMI’s purchase of El Paso. In 2013, EPB expects to generate earnings before DD&A of $1.22 billion (adding back EPB’s share of joint venture DD&A), an increase of over $50 million compared to 2012. EPB expects to produce excess cash flow of more than $25 million above the 2013 distribution target of $2.55.

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