Kinder Morgan (NYSE: KMI) reported Q4 EPS of $0.25, $0.01 worse than the analyst estimate of $0.26. Revenue for the quarter came in at $3.78 billion versus the consensus estimate of $3.81 billion.

2019 Outlook

For 2019, KMI’s budget contemplates declared dividends of $1.00 per common share, DCF of approximately $5.0 billion ($2.20 per common share) and Adjusted EBITDA of approximately $7.8 billion. KMI forecasts to invest $3.1 billion in growth projects and contributions to joint ventures during 2019. KMI expects to use internally generated cash flow to fully fund its 2019 dividend payment as well as the vast majority of its 2019 discretionary spending, without the need to access equity markets. KMI also expects to end 2019 with a Net Debt-to-Adjusted EBITDA ratio of approximately 4.5 times.

KMI does not provide budgeted net income attributable to common stockholders (the GAAP financial measure most directly comparable to DCF and Adjusted EBITDA) due to the impracticality of predicting certain amounts required by GAAP, such as ineffectiveness on commodity, interest rate and foreign currency hedges, unrealized gains and losses on derivatives marked to market, and potential changes in estimates for certain contingent liabilities.

KMI’s budgeted expectations assume average annual prices for West Texas Intermediate (WTI) crude oil of $60.00 per barrel and Henry Hub natural gas of $3.15 per million British Thermal Units (MMBtu), consistent with forward pricing during the company’s budget process. The vast majority of revenue KMI generates is fee-based and therefore not directly exposed to commodity prices. For 2019, we estimate that every $1 per barrel change in the average WTI crude oil price impacts DCF by approximately $8 million and each $0.10 per MMBtu change in the price of natural gas impacts DCF by approximately $1 million. The primary area where KMI has commodity price sensitivity is in its CO2�segment, with the majority of the segment’s next 12 months of oil and NGL production hedged to minimize this sensitivity. The segment is currently hedged for 32,002 barrels per day (Bbl/d) at $55.81/Bbl in 2019; 17,000 Bbl/d at $56.37/Bbl in 2020; 9,400 Bbl/d at $55.06/Bbl in 2021; and 3,500 Bbl/d at $56.88/Bbl in 2022.

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