Kinder Morgan, Inc 10-Q for FY2023 Q2
Kinder Morgan, Inc. (KMI)
10-Q
2023-07-21
For: 2023-06-30
View Original
Added on
April 11, 2026
About this 10-Q
Kinder Morgan, Inc filed this 10-Q on July 21, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3.5B
- down 32.0% from $5.15B a year earlier
- Net income
- $586M
- down 7.7% from net income of $635M a year earlier
- Diluted EPS
- $0.26
- down 7.1% from $0.28 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-Q
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
or
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission file number: 001-35081
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices)(zip code)
Registrant’s telephone number, including area code: 713 -369-9000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
As of July 20, 2023, the registrant had 2,228,165,367 shares of Class P common stock outstanding.
KINDER MORGAN, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
| Page Number | |||||||||||
1
KINDER MORGAN, INC. AND SUBSIDIARIES
GLOSSARY
Company Abbreviations
| EPNG | = | El Paso Natural Gas Company, L.L.C. | Ruby | = | Ruby Pipeline Holding Company, L.L.C. | ||||||||||||
| KMBT | = | Kinder Morgan Bulk Terminals, Inc. | SFPP | = | SFPP, L.P. | ||||||||||||
| KMI | = | Kinder Morgan, Inc. and its majority-owned and/or controlled subsidiaries | SNG | = | Southern Natural Gas Company, L.L.C. | ||||||||||||
| TGP | = | Tennessee Gas Pipeline Company, L.L.C. | |||||||||||||||
| KMLT | = | Kinder Morgan Liquid Terminals, LLC | |||||||||||||||
| Unless the context otherwise requires, references to “we,” “us,” “our,” or “the Company” are intended to mean Kinder Morgan, Inc. and its majority-owned and/or controlled subsidiaries. | |||||||||||||||||
| Common Industry and Other Terms | |||||||||||||||||
| /d | = | per day | FERC | = | Federal Energy Regulatory Commission | ||||||||||||
| Bbl | = | barrels | GAAP | = | U.S. Generally Accepted Accounting Principles | ||||||||||||
| BBtu | = | billion British Thermal Units | LLC | = | limited liability company | ||||||||||||
| Bcf | = | billion cubic feet | LIBOR | = | London Interbank Offered Rate | ||||||||||||
| CERCLA | = | Comprehensive Environmental Response, Compensation and Liability Act | MBbl | = | thousand barrels | ||||||||||||
| MMBbl | = | million barrels | |||||||||||||||
CO2 | = | carbon dioxide or our CO2 business segment | MMtons | = | million tons | ||||||||||||
| DCF | = | distributable cash flow | NGL | = | natural gas liquids | ||||||||||||
| DD&A | = | depreciation, depletion and amortization | NYMEX | = | New York Mercantile Exchange | ||||||||||||
| EBDA | = | earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments | OTC | = | over-the-counter | ||||||||||||
| PHMSA | = | Pipeline and Hazardous Materials Safety Administration | |||||||||||||||
| EBITDA | = | earnings before interest, income taxes, depreciation, depletion and amortization expenses, and amortization of excess cost of equity investments | RNG | = | Renewable natural gas | ||||||||||||
| ROU | = | Right-of-Use | |||||||||||||||
| EPA | = | U.S. Environmental Protection Agency | U.S. | = | United States of America | ||||||||||||
| FASB | = | Financial Accounting Standards Board | WTI | = | West Texas Intermediate | ||||||||||||
2
Information Regarding Forward-Looking Statements
This report includes forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. They use words such as “anticipate,” “believe,” “intend,” “plan,” “projection,” “forecast,” “strategy,” “outlook,” “continue,” “estimate,” “expect,” “may,” “will,” “shall,” or the negative of those terms or other variations of them or comparable terminology. In particular, expressed or implied statements concerning future actions, conditions or events, future operating results or the ability to generate sales, income or cash flow, service debt or pay dividends, are forward-looking statements. Forward-looking statements in this report include, among others, express or implied statements pertaining to: the long-term demand for our assets and services, our anticipated dividends and capital projects, including expected completion timing and benefits of those projects.
Important factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements in this report include: the timing and extent of changes in the supply of and demand for the products we transport and handle; commodity prices; the outcomes of challenges to new regulations; our ability to mitigate the impacts of and recover expenditures made in respect of new regulations; and the other risks and uncertainties described in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Part I, Item 3. “Quantitative and Qualitative Disclosures About Market Risk” and Part II, Item 1A. “Risk Factors” in this report, as well as “Information Regarding Forward-Looking Statements” and Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 (except to the extent such information is modified or superseded by information in subsequent reports).
You should keep these risk factors in mind when considering forward-looking statements. These risk factors could cause our actual results to differ materially from those contained in any forward-looking statement. Because of these risks and uncertainties, you should not place undue reliance on any forward-looking statement. We disclaim any obligation, other than as required by applicable law, to publicly update or revise any of our forward-looking statements to reflect future events or developments.
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts, unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Services | $ | $ | $ | $ | |||||||||||||||||||
| Commodity sales | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
Total Revenues | |||||||||||||||||||||||
| Operating Costs, Expenses and Other | |||||||||||||||||||||||
| Costs of sales (exclusive of items shown separately below) | |||||||||||||||||||||||
| Operations and maintenance | |||||||||||||||||||||||
| Depreciation, depletion and amortization | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Taxes, other than income taxes | |||||||||||||||||||||||
| Gain on divestitures and impairments, net | ( | ( | ( | ( | |||||||||||||||||||
| Other income, net | ( | ( | ( | ( | |||||||||||||||||||
Total Operating Costs, Expenses and Other | |||||||||||||||||||||||
| Operating Income | |||||||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Earnings from equity investments | |||||||||||||||||||||||
| Amortization of excess cost of equity investments | ( | ( | ( | ( | |||||||||||||||||||
| Interest, net | ( | ( | ( | ( | |||||||||||||||||||
| Other, net | |||||||||||||||||||||||
Total Other Expense | ( | ( | ( | ( | |||||||||||||||||||
| Income Before Income Taxes | |||||||||||||||||||||||
| Income Tax Expense | ( | ( | ( | ( | |||||||||||||||||||
| Net Income | |||||||||||||||||||||||
| Net Income Attributable to Noncontrolling Interests | ( | ( | ( | ( | |||||||||||||||||||
| Net Income Attributable to Kinder Morgan, Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Class P Common Stock | |||||||||||||||||||||||
| Basic and Diluted Earnings Per Share | $ | $ | $ | $ | |||||||||||||||||||
| Basic and Diluted Weighted Average Shares Outstanding | |||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions, unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
Net unrealized gain (loss) from derivative instruments (net of taxes of $( | ( | ( | |||||||||||||||||||||
Reclassification into earnings of net derivative instruments loss to net income (net of taxes of $ | ( | ( | |||||||||||||||||||||
Benefit plan adjustments (net of taxes of $( | |||||||||||||||||||||||
| Total other comprehensive income (loss) | ( | ||||||||||||||||||||||
| Comprehensive income | |||||||||||||||||||||||
| Comprehensive income attributable to noncontrolling interests | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive income attributable to KMI | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share amounts, unaudited)
| June 30, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted deposits | |||||||||||
| Accounts receivable | |||||||||||
| Fair value of derivative contracts | |||||||||||
| Inventories | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Investments | |||||||||||
| Goodwill | |||||||||||
| Other intangibles, net | |||||||||||
| Deferred charges and other assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Current portion of debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued interest | |||||||||||
| Fair value of derivative contracts | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term liabilities and deferred credits | |||||||||||
| Long-term debt | |||||||||||
Outstanding | |||||||||||
Debt fair value adjustments | |||||||||||
| Total long-term debt | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-term liabilities and deferred credits | |||||||||||
| Total long-term liabilities and deferred credits | |||||||||||
| Total Liabilities | |||||||||||
| Commitments and contingencies (Notes 3 and 9) | |||||||||||
| Stockholders’ Equity | |||||||||||
Class P Common Stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total Kinder Morgan, Inc.’s stockholders’ equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total Stockholders’ Equity | |||||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
| KINDER MORGAN, INC. AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (In millions, unaudited) | |||||||||||
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash Flows From Operating Activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation, depletion and amortization | |||||||||||
| Deferred income taxes | |||||||||||
| Amortization of excess cost of equity investments | |||||||||||
| Change in fair value of derivative contracts | ( | ||||||||||
| Gain on divestitures and impairments, net | ( | ( | |||||||||
| Earnings from equity investments | ( | ( | |||||||||
| Distributions from equity investment earnings | |||||||||||
| Changes in components of working capital | |||||||||||
| Accounts receivable | ( | ||||||||||
| Inventories | ( | ||||||||||
| Other current assets | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Accrued interest, net of interest rate swaps | ( | ( | |||||||||
| Other current liabilities | ( | ||||||||||
| Rate reparations, refunds and other litigation reserve adjustments | ( | ( | |||||||||
| Other, net | ( | ( | |||||||||
| Net Cash Provided by Operating Activities | |||||||||||
| Cash Flows From Investing Activities | |||||||||||
| Acquisition of assets | ( | ||||||||||
| Capital expenditures | ( | ( | |||||||||
| Contributions to investments | ( | ( | |||||||||
| Distributions from equity investments in excess of cumulative earnings | |||||||||||
| Other, net | ( | ||||||||||
| Net Cash Used in Investing Activities | ( | ( | |||||||||
| Cash Flows From Financing Activities | |||||||||||
| Issuances of debt | |||||||||||
| Payments of debt | ( | ( | |||||||||
| Debt issue costs | ( | ( | |||||||||
| Dividends | ( | ( | |||||||||
| Repurchases of shares | ( | ( | |||||||||
| Distributions to noncontrolling interests | ( | ( | |||||||||
| Other, net | ( | ||||||||||
| Net Cash Used in Financing Activities | ( | ( | |||||||||
| Net Decrease in Cash, Cash Equivalents and Restricted Deposits | ( | ( | |||||||||
| Cash, Cash Equivalents and Restricted Deposits, beginning of period | |||||||||||
| Cash, Cash Equivalents and Restricted Deposits, end of period | $ | $ | |||||||||
7
| KINDER MORGAN, INC. AND SUBSIDIARIES (Continued) | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (In millions, unaudited) | |||||||||||
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash and Cash Equivalents, beginning of period | $ | $ | |||||||||
| Restricted Deposits, beginning of period | |||||||||||
| Cash, Cash Equivalents and Restricted Deposits, beginning of period | |||||||||||
| Cash and Cash Equivalents, end of period | |||||||||||
| Restricted Deposits, end of period | |||||||||||
| Cash, Cash Equivalents and Restricted Deposits, end of period | |||||||||||
| Net Decrease in Cash, Cash Equivalents and Restricted Deposits | $ | ( | $ | ( | |||||||
| Non-cash Investing and Financing Activities | |||||||||||
| Assets contributed to equity investment | $ | $ | |||||||||
| ROU assets and operating lease obligations recognized including adjustments | ( | ||||||||||
| Increase in property, plant and equipment from both accruals and contractor retainage | |||||||||||
| Supplemental Disclosures of Cash Flow Information | |||||||||||
| Cash paid during the period for interest (net of capitalized interest) | |||||||||||
| Cash paid during the period for income taxes, net | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
8
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, unaudited)
| Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Stockholders’ equity attributable to KMI | Non- controlling interests | Total | |||||||||||||||||||||||||||||||||||||||||
| Issued shares | Par value | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Repurchases of shares | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Restricted shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||
Dividends | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Distributions | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Other | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Stockholders’ equity attributable to KMI | Non- controlling interests | Total | |||||||||||||||||||||||||||||||||||||||||
| Issued shares | Par value | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Repurchases of shares | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Restricted shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
9
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(In millions, unaudited)
| Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Stockholders’ equity attributable to KMI | Non- controlling interests | Total | |||||||||||||||||||||||||||||||||||||||||
| Issued shares | Par value | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Repurchases of shares | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Restricted shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||
Dividends | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Distributions | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Other | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Stockholders’ equity attributable to KMI | Non- controlling interests | Total | |||||||||||||||||||||||||||||||||||||||||
| Issued shares | Par value | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Impact of adoption of ASU 2020-06 (Note 4) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of shares | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| EP Trust I Preferred security conversions | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
10
KINDER MORGAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
Organization
We are one of the largest energy infrastructure companies in North America. We own an interest in or operate approximately 82,000 miles of pipelines, 140 terminals, 700 Bcf of working natural gas storage capacity and 3.8 Bcf per year of RNG generation capacity. Our pipelines transport natural gas, refined petroleum products, crude oil, condensate, CO2, renewable fuels and other products, and our terminals store and handle various commodities including gasoline, diesel fuel, jet fuel, chemicals, metals, petroleum coke and ethanol and other renewable fuels and feedstocks.
Basis of Presentation
General
Our accompanying unaudited consolidated financial statements have been prepared under the rules and regulations of the U.S. Securities and Exchange Commission (SEC). These rules and regulations conform to the accounting principles contained in the FASB’s Accounting Standards Codification (ASC), the single source of GAAP. In compliance with such rules and regulations, all significant intercompany items have been eliminated in consolidation.
In our opinion, all adjustments, which are of a normal and recurring nature, considered necessary for a fair statement of our financial position and operating results for the interim periods have been included in the accompanying consolidated financial statements, and certain amounts from prior periods have been reclassified to conform to the current presentation. Interim results are not necessarily indicative of results for a full year; accordingly, you should read these consolidated financial statements in conjunction with our consolidated financial statements and related notes included in our 2022 Form 10-K.
The accompanying unaudited consolidated financial statements include our accounts and the accounts of our subsidiaries over which we have control or are the primary beneficiary. We evaluate our financial interests in business enterprises to determine if they represent variable interest entities where we are the primary beneficiary. If such criteria are met, we consolidate the financial statements of such businesses with those of our own.
Goodwill
In addition to periodically evaluating long-lived assets and goodwill for impairment based on changes in market conditions, we evaluate goodwill for impairment on May 31 of each year. For our May 31, 2023 evaluation, we grouped our businesses into seven reporting units as follows: (i) Natural Gas Pipelines Regulated; (ii) Natural Gas Pipelines Non-Regulated; (iii) CO2; (iv) Products Pipelines (excluding associated terminals); (v) Products Pipelines Terminals (evaluated separately from Products Pipelines for goodwill purposes); (vi) Terminals and (vii) Energy Transition Ventures.
The fair value estimates used in our goodwill impairment test include Level 3 inputs of the fair value hierarchy. The inputs include valuation estimates using market and income approach valuation methodologies, which include assumptions primarily involving management’s significant judgments and estimates with respect to market multiples, comparable sales transactions, general economic conditions and the related demand for products handled or transported by our assets as well as assumptions regarding future cash flows based on production growth assumptions, terminal values and discount rates. Changes to any one or a combination of these factors would result in a change to the reporting unit fair values, which could lead to future impairment charges. Such potential non-cash impairments could have a significant effect on our results of operations.
The results of our May 31, 2023 annual impairment test indicated that for each of our reporting units, the reporting unit’s fair value exceeded the carrying value, with our Terminals reporting unit’s fair value in excess of its carrying value by less than 10 % which was impacted by a decline in market multiples.
Earnings per Share
We calculate earnings per share using the two-class method. Earnings were allocated to Class P common stock and participating securities based on the amount of dividends paid in the current period plus an allocation of the undistributed
11
The following table sets forth the allocation of net income available to shareholders of Class P common stock and participating securities:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||||
| Net Income Available to Stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Participating securities: | |||||||||||||||||||||||
| Less: Net Income Allocated to Restricted Stock Awards(a) | ( | ( | ( | ( | |||||||||||||||||||
| Net Income Allocated to Class P Stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Basic Weighted Average Shares Outstanding | |||||||||||||||||||||||
| Basic Earnings Per Share | $ | $ | $ | $ | |||||||||||||||||||
(a)As of June 30, 2023, there were 13 million restricted stock awards outstanding.
The following table presents the maximum number of potential common stock equivalents which are antidilutive and accordingly are excluded from the determination of diluted earnings per share. As we have no other common stock equivalents, our diluted earnings per share are the same as our basic earnings per share for all periods presented.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions on a weighted average basis) | |||||||||||||||||||||||
| Unvested restricted stock awards | |||||||||||||||||||||||
| Convertible trust preferred securities | |||||||||||||||||||||||
2. Losses on Impairments
Impairments
During the first quarter of 2023, we recognized an impairment of $67 million related to our investment in Double Eagle Pipeline LLC (Double Eagle). The impairment was driven by lower expected renewal rates on contracts that expire in the second half of 2023. The impairment is recognized on our accompanying consolidated statement of income for the six months ended June 30, 2023 within “Earnings from equity investments.” Our investment in Double Eagle and associated earnings is included within our Products Pipelines business segment.
Ruby Chapter 11 Bankruptcy
On January 13, 2023, the bankruptcy court confirmed a plan of reorganization satisfactory to all interested parties regarding Ruby, which involved payment of Ruby’s outstanding senior notes with the proceeds from the sale of Ruby to Tallgrass, a settlement by KMI and Pembina of certain potential causes of action relating to the bankruptcy, and cash on hand. Our payment to the bankruptcy estate, net of payments received in respect of a long-term subordinated note receivable from Ruby, was approximately $28.5 million which was accrued for as of December 31, 2022. Consummation of the settlement and the sale of Ruby to Tallgrass occurred on January 13, 2023. We fully impaired our equity investment in Ruby in the fourth quarter of 2019 and fully impaired our investment in Ruby’s subordinated notes in the first quarter of 2021.
12
3. Debt
The following table provides information on the principal amount of our outstanding debt balances:
| June 30, 2023 | December 31, 2022 | |||||||||||||
| (In millions, unless otherwise stated) | ||||||||||||||
| Current portion of debt | ||||||||||||||
$ | $ | $ | ||||||||||||
$ | ||||||||||||||
| Commercial paper notes | ||||||||||||||
| Current portion of senior notes | ||||||||||||||
| Floating rate, due January 2023 | ||||||||||||||
Trust I preferred securities, | ||||||||||||||
| Current portion of other debt | ||||||||||||||
| Total current portion of debt | ||||||||||||||
| Long-term debt (excluding current portion) | ||||||||||||||
| Senior notes | ||||||||||||||
EPC Building, LLC, promissory note, | ||||||||||||||
Trust I preferred securities, | ||||||||||||||
| Other | ||||||||||||||
| Total long-term debt | ||||||||||||||
| Total debt(b) | $ | $ | ||||||||||||
(a)Reflects the portion of cash consideration payable if all the outstanding securities as of the end of the reporting period were converted by the holders.
(b)Excludes our “Debt fair value adjustments” which, as of June 30, 2023 and December 31, 2022, increased our total debt balances by $96 million and $115 million, respectively.
We and substantially all of our wholly owned domestic subsidiaries are parties to a cross guarantee agreement whereby each party to the agreement unconditionally guarantees, jointly and severally, the payment of specified indebtedness of each other party to the agreement.
On January 31, 2023, we issued in a registered offering $1,500 million aggregate principal amount of 5.20 % senior notes due 2033 for net proceeds of $1,485 million, which were used to repay short-term borrowings, maturing debt and for general corporate purposes.
Credit Facilities and Restrictive Covenants
As of June 30, 2023, we had no borrowings outstanding under our credit facilities, no borrowings outstanding under our commercial paper program and $81 3.9 billion. For the period ended June 30, 2023, we were in compliance with all required covenants.
13
Fair Value of Financial Instruments
The carrying value and estimated fair value of our outstanding debt balances are disclosed below:
| June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
| Carrying value | Estimated fair value(a) | Carrying value | Estimated fair value(a) | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Total debt | $ | $ | $ | $ | |||||||||||||||||||
(a)Included in the estimated fair value are amounts for our Trust I Preferred Securities of $203 million and $195 million as of June 30, 2023 and December 31, 2022, respectively.
We used Level 2 input values to measure the estimated fair value of our outstanding debt balance as of both June 30, 2023 and December 31, 2022.
4. Stockholders’ Equity
Class P Common Stock
On July 19, 2017, our board of directors approved a $2 billion share buy-back program that began in December 2017. On January 18, 2023, our board of directors approved an increase in our share repurchase authorization to $3 billion. During the six months ended June 30, 2023, we repurchased 19 million of our shares for $317 million at an average price of $16.59 per share. Subsequent to June 30, 2023 and through July 20, 2023, we repurchased less than 1 million shares for $13 million at an average price of $16.93 per share. All shares we have repurchased are canceled and are no longer outstanding.
Dividends
The following table provides information about our per share dividends:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Per share cash dividend declared for the period | $ | $ | $ | $ | |||||||||||||||||||
| Per share cash dividend paid in the period | |||||||||||||||||||||||
On July 19, 2023, our board of directors declared a cash dividend of $0.2825 per share for the quarterly period ended June 30, 2023, which is payable on August 15, 2023 to shareholders of record as of the close of business on July 31, 2023.
Adoption of Accounting Pronouncement
On January 1, 2022, we adopted Accounting Standards Update (ASU) No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” This ASU (i) simplifies an issuer’s accounting for convertible instruments by eliminating two of the three models in Subtopic 470-20 that require separate accounting for embedded conversion features, (ii) amends diluted earnings per share calculations for convertible instruments by requiring the use of the if-converted method and (iii) simplifies the settlement assessment entities are required to perform on contracts that can potentially settle in an entity’s own equity by removing certain requirements. Using the modified retrospective method, the adoption of this ASU resulted in a pre-tax adjustment of $14 million to unwind the remaining unamortized debt discount within “Debt fair value adjustments” on our consolidated balance sheet and an adjustment of $11 million to unwind the balance of the conversion feature classified in “Additional paid in capital” on our consolidated statement of stockholders’ equity for the six months ended June 30, 2022.
14
Accumulated Other Comprehensive Loss
Changes in the components of our “Accumulated other comprehensive loss” not including noncontrolling interests are summarized as follows:
| Net unrealized gains/(losses) on cash flow hedge derivatives | Pension and other postretirement liability adjustments | Total accumulated other comprehensive loss | |||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
Balance as of December 31, 2022 | $ | ( | $ | ( | $ | ( | |||||||||||||||||
| Other comprehensive gain before reclassifications | |||||||||||||||||||||||
| Gain reclassified from accumulated other comprehensive loss | ( | ( | |||||||||||||||||||||
| Net current-period change in accumulated other comprehensive loss | |||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | ( | $ | ( | $ | ( | |||||||||||||||||
| Net unrealized gains/(losses) on cash flow hedge derivatives | Pension and other postretirement liability adjustments | Total accumulated other comprehensive loss | |||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | ( | $ | ( | $ | ( | |||||||||||||||||
| Other comprehensive (loss) gain before reclassifications | ( | ( | |||||||||||||||||||||
| Loss reclassified from accumulated other comprehensive loss | |||||||||||||||||||||||
| Net current-period change in accumulated other comprehensive loss | ( | ( | |||||||||||||||||||||
| Balance as of June 30, 2022 | $ | ( | $ | ( | $ | ( | |||||||||||||||||
5. Risk Management
Certain of our business activities expose us to risks associated with unfavorable changes in the market price of natural gas, NGL and crude oil. We also have exposure to interest rate and foreign currency risk as a result of the issuance of our debt obligations. Pursuant to our management’s approved risk management policy, we use derivative contracts to hedge or reduce our exposure to some of these risks.
Energy Commodity Price Risk Management
As of June 30, 2023, we had the following outstanding commodity forward contracts to hedge our forecasted energy commodity purchases and sales:
| Net open position long/(short) | |||||||||||
| Derivatives designated as hedging contracts | |||||||||||
| Crude oil fixed price | ( | MMBbl | |||||||||
| Crude oil basis | ( | MMBbl | |||||||||
| Natural gas fixed price | ( | Bcf | |||||||||
| Natural gas basis | ( | Bcf | |||||||||
| NGL fixed price | ( | MMBbl | |||||||||
| Derivatives not designated as hedging contracts | |||||||||||
| Crude oil fixed price | ( | MMBbl | |||||||||
| Crude oil basis | ( | MMBbl | |||||||||
| Natural gas fixed price | ( | Bcf | |||||||||
| Natural gas basis | ( | Bcf | |||||||||
| NGL fixed price | ( | MMBbl | |||||||||
15
As of June 30, 2023, the maximum length of time over which we have hedged, for accounting purposes, our exposure to the variability in future cash flows associated with energy commodity price risk is through December 2027.
Interest Rate Risk Management
We utilize interest rate derivatives to hedge our exposure to both changes in the fair value of our fixed rate debt instruments and variability in expected future cash flows attributable to variable interest rate payments. The following table summarizes our outstanding interest rate contracts as of June 30, 2023:
| Notional amount | Accounting treatment | Maximum term | |||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||
| Fixed-to-variable interest rate contracts(a)(b) | $ | Fair value hedge | March 2035 | ||||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||
| Variable-to-fixed interest rate contracts | Mark-to-Market | December 2023 | |||||||||||||||||||||
(a)The principal amount of hedged senior notes consisted of $2,050 million included in “Current portion of debt” and $5,350 million included in “Long-term debt” on our accompanying consolidated balance sheet.
(b)During the three and six months ended June 30, 2023, certain optional expedients as set forth in Topic 848 – Reference Rate Reform were elected on certain of these contracts to preserve fair value hedge accounting treatment. See Note 10 for further information on Topic 848.
Foreign Currency Risk Management
We utilize foreign currency derivatives to hedge our exposure to variability in foreign exchange rates. The following table summarizes our outstanding foreign currency contracts as of June 30, 2023:
| Notional amount | Accounting treatment | Maximum term | |||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||
| EUR-to-USD cross currency swap contracts(a) | $ | Cash flow hedge | March 2027 | ||||||||||||||||||||
(a)These swaps eliminate the foreign currency risk associated with our Euro-denominated debt.
16
Impact of Derivative Contracts on Our Consolidated Financial Statements
The following table summarizes the fair values of our derivative contracts included on our accompanying consolidated balance sheets:
| Fair Value of Derivative Contracts | |||||||||||||||||||||||||||||
| Location | Derivatives Asset | Derivatives Liability | |||||||||||||||||||||||||||
| June 30, 2023 | December 31, 2022 | June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||||||||
| Energy commodity derivative contracts | |||||||||||||||||||||||||||||
| Fair value of derivative contracts/(Fair value of derivative contracts) | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||
| Deferred charges and other assets/(Other long-term liabilities and deferred credits) | ( | ( | |||||||||||||||||||||||||||
| Subtotal | ( | ( | |||||||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||||||||
| Fair value of derivative contracts/(Fair value of derivative contracts) | ( | ( | |||||||||||||||||||||||||||
| Deferred charges and other assets/(Other long-term liabilities and deferred credits) | ( | ( | |||||||||||||||||||||||||||
| Subtotal | ( | ( | |||||||||||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||||||||
| Fair value of derivative contracts/(Fair value of derivative contracts) | ( | ( | |||||||||||||||||||||||||||
| Deferred charges and other assets/(Other long-term liabilities and deferred credits) | ( | ( | |||||||||||||||||||||||||||
| Subtotal | ( | ( | |||||||||||||||||||||||||||
| Total | ( | ( | |||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||||||||
| Energy commodity derivative contracts | |||||||||||||||||||||||||||||
| Fair value of derivative contracts/(Fair value of derivative contracts) | ( | ( | |||||||||||||||||||||||||||
| Deferred charges and other assets/(Other long-term liabilities and deferred credits) | ( | ( | |||||||||||||||||||||||||||
| Subtotal | ( | ( | |||||||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||||||||
| Fair value of derivative contracts/(Fair value of derivative contracts) | |||||||||||||||||||||||||||||
| Subtotal | |||||||||||||||||||||||||||||
| Total | ( | ( | |||||||||||||||||||||||||||
| Total derivatives | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||
17
The following two tables summarize the fair value measurements of our derivative contracts based on the three levels established by the ASC. The tables also identify the impact of derivative contracts which we have elected to present on our accompanying consolidated balance sheets on a gross basis that are eligible for netting under master netting agreements.
| Balance sheet asset fair value measurements by level | Contracts available for netting | Cash collateral held(a) | |||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Gross amount | Net amount | |||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||
| As of June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Energy commodity derivative contracts(b) | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||||||||||||||||||||
| As of December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
| Energy commodity derivative contracts(b) | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||||||||||||||||||||
| Balance sheet liability fair value measurements by level | Contracts available for netting | Cash collateral posted(a) | |||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Gross amount | Net amount | |||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||
| As of June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Energy commodity derivative contracts(b) | $ | ( | $ | ( | $ | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||
| Interest rate contracts | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Foreign currency contracts | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| As of December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
| Energy commodity derivative contracts(b) | $ | ( | $ | ( | $ | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||
| Interest rate contracts | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Foreign currency contracts | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
(a)Any cash collateral paid or received is reflected in this table, but only to the extent that it represents variation margins. Any amount associated with derivative prepayments or initial margins that are not influenced by the derivative asset or liability amounts or those that are determined solely on their volumetric notional amounts are excluded from this table.
(b)Level 1 consists primarily of NYMEX natural gas futures. Level 2 consists primarily of OTC WTI swaps, NGL swaps and crude oil basis swaps.
The following tables summarize the pre-tax impact of our derivative contracts on our accompanying consolidated statements of income and comprehensive income:
| Derivatives in fair value hedging relationships | Location | Gain/(loss) recognized in income on derivative and related hedged item | ||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
Interest rate contracts | Interest, net | $ | $ | $ | $ | |||||||||||||||||||||||||||
Hedged fixed rate debt(a) | Interest, net | $ | $ | $ | $ | |||||||||||||||||||||||||||
(a)As of June 30, 2023, the cumulative amount of fair value hedging adjustments to our hedged fixed rate debt was a decrease of $350 million included in “Debt fair value adjustments” on our accompanying consolidated balance sheet.
18
Derivatives in cash flow hedging relationships | Gain/(loss) recognized in OCI on derivative(a) | Location | Gain/(loss) reclassified from Accumulated OCI into income(b) | |||||||||||||||||||||||||||||
| Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| (In millions) | (In millions) | |||||||||||||||||||||||||||||||
Energy commodity derivative contracts | $ | $ | ( | Revenues—Commodity sales | $ | $ | ( | |||||||||||||||||||||||||
Costs of sales | ( | |||||||||||||||||||||||||||||||
Interest rate contracts | Interest, net | |||||||||||||||||||||||||||||||
Foreign currency contracts | ( | Other, net | ( | |||||||||||||||||||||||||||||
| Total | $ | $ | ( | Total | $ | $ | ( | |||||||||||||||||||||||||
Derivatives in cash flow hedging relationships | Gain/(loss) recognized in OCI on derivative(a) | Location | Gain/(loss) reclassified from Accumulated OCI into income(b) | |||||||||||||||||||||||||||||
| Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| (In millions) | (In millions) | |||||||||||||||||||||||||||||||
Energy commodity derivative contracts | $ | $ | ( | Revenues—Commodity sales | $ | $ | ( | |||||||||||||||||||||||||
Costs of sales | ( | |||||||||||||||||||||||||||||||
Interest rate contracts | Interest, net | |||||||||||||||||||||||||||||||
Foreign currency contracts | ( | Other, net | ( | |||||||||||||||||||||||||||||
| Total | $ | $ | ( | Total | $ | $ | ( | |||||||||||||||||||||||||
(a)We expect to reclassify approximately $34 million of loss associated with cash flow hedge price risk management activities included in our accumulated other comprehensive loss balance as of June 30, 2023 into earnings during the next twelve months (when the associated forecasted transactions are also expected to impact earnings); however, actual amounts reclassified into earnings could vary materially as a result of changes in market prices.
(b)During the three and six months ended June 30, 2022, we recognized approximate gains of $5
| Derivatives not designated as accounting hedges | Location | Gain/(loss) recognized in income on derivatives | ||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
Energy commodity derivative contracts | Revenues—Commodity sales | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||
Costs of sales | ( | ( | ||||||||||||||||||||||||||||||
| Earnings from equity investments | ( | |||||||||||||||||||||||||||||||
| Interest rate contracts | Interest, net | |||||||||||||||||||||||||||||||
| Total(a) | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
(a)The three and six months ended June 30, 2023 amounts include approximate gains of $7 million and $35 million, respectively, and the three and six months ended June 30, 2022 amounts include approximate losses of $38 million and $20 million, respectively. These gains and losses were associated with natural gas, crude and NGL derivative contract settlements.
19
Credit Risks
In conjunction with certain derivative contracts, we are required to provide collateral to our counterparties, which may include posting letters of credit or placing cash in margin accounts. As of June 30, 2023 and December 31, 2022, we had no 72 million and $1 million, respectively, posted by our counterparties with us as collateral and reported within “Other current liabilities” on our accompanying consolidated balance sheets. The cash margin balance at June 30, 2023 represents our initial margin requirements of $29 million and variation margin requirements of $101 million posted by our counterparties. We also use industry standard commercial agreements that allow for the netting of exposures associated with transactions executed under a single commercial agreement. Additionally, we generally utilize master netting agreements to offset credit exposure across multiple commercial agreements with a single counterparty.
We also have agreements with certain counterparties to our derivative contracts that contain provisions requiring the posting of additional collateral upon a decrease in our credit rating. As of June 30, 2023, based on our current mark-to-market positions and posted collateral, we estimate that if our credit rating were downgraded one notch, we would not be required to post additional collateral. If we were downgraded two notches, we estimate that we would be required to post $52 million of additional collateral.
6. Revenue Recognition
Disaggregation of Revenues
The following tables present our revenues disaggregated by revenue source and type of revenue for each revenue source:
| Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
| Natural Gas Pipelines | Products Pipelines | Terminals | CO2 | Corporate and Eliminations | Total | |||||||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||||||||
| Revenues from contracts with customers(a) | ||||||||||||||||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||||||||||||||||
| Firm services(b) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Fee-based services | ||||||||||||||||||||||||||||||||||||||
| Total services | ||||||||||||||||||||||||||||||||||||||
| Commodity sales | ||||||||||||||||||||||||||||||||||||||
| Natural gas sales | ( | |||||||||||||||||||||||||||||||||||||
| Product sales | ( | |||||||||||||||||||||||||||||||||||||
| Total commodity sales | ( | |||||||||||||||||||||||||||||||||||||
| Total revenues from contracts with customers | ( | |||||||||||||||||||||||||||||||||||||
| Other revenues(c) | ||||||||||||||||||||||||||||||||||||||
| Leasing services(d) | ||||||||||||||||||||||||||||||||||||||
| Derivatives adjustments on commodity sales | ( | |||||||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||
| Total other revenues | ||||||||||||||||||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
20
| Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||
| Natural Gas Pipelines | Products Pipelines | Terminals | CO2 | Corporate and Eliminations | Total | |||||||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||||||||
| Revenues from contracts with customers(a) | ||||||||||||||||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||||||||||||||||
| Firm services(b) | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
| Fee-based services | ||||||||||||||||||||||||||||||||||||||
| Total services | ( | |||||||||||||||||||||||||||||||||||||
| Commodity sales | ||||||||||||||||||||||||||||||||||||||
| Natural gas sales | ( | |||||||||||||||||||||||||||||||||||||
| Product sales | ||||||||||||||||||||||||||||||||||||||
| Total commodity sales | ||||||||||||||||||||||||||||||||||||||
| Total revenues from contracts with customers | ||||||||||||||||||||||||||||||||||||||
| Other revenues(c) | ||||||||||||||||||||||||||||||||||||||
| Leasing services(d) | ||||||||||||||||||||||||||||||||||||||
| Derivatives adjustments on commodity sales | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||
| Total other revenues | ( | |||||||||||||||||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
| Natural Gas Pipelines | Products Pipelines | Terminals | CO2 | Corporate and Eliminations | Total | |||||||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||||||||
| Revenues from contracts with customers(a) | ||||||||||||||||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||||||||||||||||
| Firm services(b) | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
| Fee-based services | ||||||||||||||||||||||||||||||||||||||
| Total services | ( | |||||||||||||||||||||||||||||||||||||
| Commodity sales | ||||||||||||||||||||||||||||||||||||||
| Natural gas sales | ( | |||||||||||||||||||||||||||||||||||||
| Product sales | ( | |||||||||||||||||||||||||||||||||||||
| Total commodity sales | ( | |||||||||||||||||||||||||||||||||||||
| Total revenues from contracts with customers | ( | |||||||||||||||||||||||||||||||||||||
| Other revenues(c) | ||||||||||||||||||||||||||||||||||||||
| Leasing services(d) | ||||||||||||||||||||||||||||||||||||||
| Derivatives adjustments on commodity sales | ( | |||||||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||
| Total other revenues | ||||||||||||||||||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
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| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||
| Natural Gas Pipelines | Products Pipelines | Terminals | CO2 | Corporate and Eliminations | Total | |||||||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||||||||
Revenues from contracts with customers(a) | ||||||||||||||||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||||||||||||||||
| Firm services(b) | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
| Fee-based services | ||||||||||||||||||||||||||||||||||||||
| Total services | ( | |||||||||||||||||||||||||||||||||||||
| Commodity sales | ||||||||||||||||||||||||||||||||||||||
| Natural gas sales | ( | |||||||||||||||||||||||||||||||||||||
| Product sales | ( | |||||||||||||||||||||||||||||||||||||
| Total commodity sales | ( | |||||||||||||||||||||||||||||||||||||
| Total revenues from contracts with customers | ( | |||||||||||||||||||||||||||||||||||||
| Other revenues(c) | ||||||||||||||||||||||||||||||||||||||
| Leasing services(d) | ||||||||||||||||||||||||||||||||||||||
Derivatives adjustments on commodity sales | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||
| Total other revenues | ( | |||||||||||||||||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
(a)Differences between the revenue classifications presented on the consolidated statements of income and the categories for the disaggregated revenues by type of revenue above are primarily attributable to revenues reflected in the “Other revenues” category above (see note (c)).
(b)Includes non-cancellable firm service customer contracts with take-or-pay or minimum volume commitment elements, including those contracts where both the price and quantity amount are fixed. Excludes service contracts with index-based pricing, which along with revenues from other customer service contracts are reported as “Fee-based services.”
(c)Amounts recognized as revenue under guidance prescribed in Topics of the ASC other than in Topic 606 were primarily from leases and derivative contracts. See Note 5 for additional information related to our derivative contracts.
(d)Our revenues from leasing services are predominantly comprised of specific assets that we lease to customers under operating leases where one customer obtains substantially all of the economic benefit from the asset and has the right to direct the use of that asset. These leases primarily consist of specific tanks, treating facilities, marine vessels and gas equipment and pipelines with separate control locations. We do not lease assets that qualify as sales-type or finance leases.
Contract Balances
As of June 30, 2023 and December 31, 2022, our contract asset balances were $34 million and $33 million, respectively. Of the contract asset balance at December 31, 2022, $20 million was transferred to accounts receivable during the six months ended June 30, 2023. As of June 30, 2023 and December 31, 2022, our contract liability balances were $231 million and $204 million, respectively. Of the contract liability balance at December 31, 2022, $50 million was recognized as revenue during the six months ended June 30, 2023.
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Revenue Allocated to Remaining Performance Obligations
The following table presents our estimated revenue allocated to remaining performance obligations for contracted revenue that has not yet been recognized, representing our “contractually committed” revenue as of June 30, 2023 that we will invoice or transfer from contract liabilities and recognize in future periods:
| Year | Estimated Revenue | |||||||
| (In millions) | ||||||||
| Six months ended December 31, 2023 | $ | |||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to service or commodity sale customer contracts which have fixed pricing and fixed volume terms and conditions, generally including contracts with take-or-pay or minimum volume commitment payment obligations. Our contractually committed revenue amounts generally exclude, based on the following practical expedient that we elected to apply, remaining performance obligations for contracts with index-based pricing or variable volume attributes in which such variable consideration is allocated entirely to a wholly unsatisfied performance obligation.
7. Reportable Segments
Financial information by segment follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Natural Gas Pipelines | |||||||||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | |||||||||||||||||||
| Intersegment revenues | ( | ||||||||||||||||||||||
| Products Pipelines | |||||||||||||||||||||||
| Terminals | |||||||||||||||||||||||
| Revenues from external customers | |||||||||||||||||||||||
| Intersegment revenues | |||||||||||||||||||||||
CO2 | |||||||||||||||||||||||
| Corporate and intersegment eliminations | ( | ( | ( | ||||||||||||||||||||
| Total consolidated revenues | $ | $ | $ | $ | |||||||||||||||||||
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| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
Segment EBDA(a) | |||||||||||||||||||||||
| Natural Gas Pipelines | $ | $ | $ | $ | |||||||||||||||||||
| Products Pipelines | |||||||||||||||||||||||
| Terminals | |||||||||||||||||||||||
CO2 | |||||||||||||||||||||||
| Total Segment EBDA | |||||||||||||||||||||||
| DD&A | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of excess cost of equity investments | ( | ( | ( | ( | |||||||||||||||||||
| General and administrative and corporate charges | ( | ( | ( | ( | |||||||||||||||||||
| Interest, net | ( | ( | ( | ( | |||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | |||||||||||||||||||
| Total consolidated net income | $ | $ | $ | $ | |||||||||||||||||||
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In millions) | |||||||||||
| Assets | |||||||||||
| Natural Gas Pipelines | $ | $ | |||||||||
| Products Pipelines | |||||||||||
| Terminals | |||||||||||
CO2 | |||||||||||
| Corporate assets(b) | |||||||||||
| Total consolidated assets | $ | $ | |||||||||
(a)Includes revenues, earnings from equity investments, operating expenses, gain on divestitures and impairments, net, other income, net, and other, net. Operating expenses include costs of sales, operations and maintenance expenses, and taxes, other than income taxes.
(b)Includes cash and cash equivalents, restricted deposits, certain prepaid assets and deferred charges, risk management assets related to derivative contracts, corporate headquarters in Houston, Texas and miscellaneous corporate assets (such as information technology, telecommunications equipment and legacy activity) not allocated to our reportable segments.
8. Income Taxes
Income tax expense included on our accompanying consolidated statements of income is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||
| Income tax expense | $ | $ | $ | $ | |||||||||||||||||||
| Effective tax rate | % | % | % | % | |||||||||||||||||||
The effective tax rates for the three and six months ended June 30, 2023 and 2022 are higher than the statutory federal rate of 21
9. Litigation and Environmental
We and our subsidiaries are parties to various legal, regulatory and other matters arising from the day-to-day operations of our businesses or certain predecessor operations that may result in claims against the Company. Although no assurance can be given, we believe, based on our experiences to date and taking into account established reserves and insurance, that the ultimate resolution of such items will not have a material adverse impact to our business. We believe we have meritorious defenses to
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the matters to which we are a party and intend to vigorously defend the Company. When we determine a loss is probable of occurring and is reasonably estimable, we accrue an undiscounted liability for such contingencies based on our best estimate using information available at that time. If the estimated loss is a range of potential outcomes and there is no better estimate within the range, we accrue the amount at the low end of the range. We disclose the following contingencies where an adverse outcome may be material or, in the judgment of management, we conclude the matter should otherwise be disclosed.
Gulf LNG Facility Disputes
On September 28, 2018, GLNG filed a lawsuit against Eni S.p.A. in the Supreme Court of the State of New York in New York County to enforce a Guarantee Agreement (Guarantee) entered into by Eni S.p.A. on December 10, 2007 in connection with a contemporaneous terminal use agreement entered into by its affiliate, Eni USA Gas Marketing LLC (Eni USA). The suit to enforce the Guarantee against Eni S.p.A. was filed after an arbitration tribunal delivered an award on June 29, 2018 which called for the termination of the terminal use agreement and payment of compensation by Eni USA to GLNG. In response to GLNG’s lawsuit to enforce the Guarantee, Eni S.p.A. filed counterclaims and other claims based on the terminal use agreement and a parent direct agreement with Gulf LNG Energy (Port), LLC. The foregoing counterclaims asserted by Eni S.p.A sought unspecified damages and involved the same substantive allegations which were dismissed with prejudice in previous separate arbitrations with Eni USA described above and with GLNG’s remaining customer Angola LNG Supply Services LLC (ALSS), a consortium of international oil companies including Eni S.p.A. On January 4, 2022, the trial court granted Eni S.p.A’s motion for summary judgment on the claims asserted by GLNG to enforce the Guarantee. GLNG filed an appeal of the trial court’s decision to the state Appellate Division. The Appellate Division denied GLNG’s appeal on February 9, 2023 and denied our motion for rehearing on July 6, 2023. GLNG may pursue further recourse to the state Court of Appeals, which is the state’s highest appellate court. With respect to the counterclaims and other claims asserted by Eni S.p.A., the trial court granted GLNG’s motion for summary judgment on June 13, 2023 and directed the clerk to enter judgment dismissing all of Eni S.p.A.’s claims. Upon entry of judgment, Eni S.p.A. may choose to take an appeal to the state Appellate Division. We intend to vigorously pursue a favorable and expeditious resolution of all claims on appeal.
Freeport LNG Winter Storm Litigation
On September 13, 2021, Freeport LNG Marketing, LLC (Freeport) filed a lawsuit against Kinder Morgan Texas Pipeline LLC and Kinder Morgan Tejas Pipeline LLC in the 133rd District Court of Harris County, Texas (Case No. 2021-58787) alleging that defendants breached the parties’ base contract for sale and purchase of natural gas by failing to repurchase natural gas nominated by Freeport between February 10-22, 2021 during Winter Storm Uri. We deny that we were obligated to repurchase natural gas from Freeport given our declaration of force majeure during the storm and our compliance with emergency orders issued by the Railroad Commission of Texas providing heightened priority for the delivery of gas to human needs customers. Freeport alleges that it is owed approximately $104 million, plus attorney fees and interest. On October 24, 2022, the trial court granted our motion for summary judgment on all of Freeport’s claims. On November 21, 2022, Freeport filed a notice of appeal to the 14th Court of Appeals, where the matter remains pending. We believe that our declaration of force majeure was valid and we intend to continue to vigorously defend this case.
Pension Plan Litigation
On February 22, 2021, Kinder Morgan Retirement Plan A participants Curtis Pedersen and Beverly Leutloff filed a purported class action lawsuit under the Employee Retirement Income Security Act of 1974 (ERISA). The named plaintiffs were hired initially by the ANR Pipeline Company (ANR) in the late 1970s. Following a series of corporate acquisitions, plaintiffs became participants in pension plans sponsored by the Coastal Corporation (Coastal), El Paso Corporation (El Paso) and our company by virtue of our acquisition of El Paso in 2012 and our assumption of certain of El Paso’s pension plan obligations. The lawsuit, which was filed initially in federal court in Michigan and then transferred to the U.S. District Court for the Southern District of Texas (Civil Action No. 4:21-3590), alleges that the series of foregoing transactions resulted in changes to plaintiffs’ retirement benefits which are now contested on a purported class-wide basis in the lawsuit. The complaint asserts six claims that fall within three primary theories of liability. Claims I, II, and III all seek the same plan modification as to how the plans calculate benefits for former participants in the Coastal plan. These claims challenge plan provisions which are alleged to constitute impermissible “backloading” or “cutback” of benefits. Claims IV and V allege that former participants in the ANR plans should be eligible for unreduced benefits at younger ages than the plans currently provide. Claim VI asserts that actuarial assumptions used to calculate reduced early retirement benefits for current or former ANR employees are outdated and therefore unreasonable. The complaint alleges that the purported class includes over 10,000 individuals. The lawsuit is in the early stages of discovery and no class has been certified. Plaintiffs seek to recover early retirement benefits as well as declaratory and injunctive relief, but have not pleaded, disclosed or otherwise specified a calculation of alleged damages. Accordingly, the extent of our potential liability for past or future benefits, if any, remains to be determined. We believe that none of the claims are valid and intend to vigorously defend this case.
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Pipeline Integrity and Releases
From time to time, despite our best efforts, our pipelines experience leaks and ruptures. These leaks and ruptures may cause explosions, fire, and damage to the environment, damage to property and/or personal injury or death. In connection with these incidents, we may be sued for damages caused by an alleged failure to properly mark the locations of our pipelines and/or to properly maintain our pipelines. Depending upon the facts and circumstances of a particular incident, state and federal regulatory authorities may seek civil and/or criminal fines and penalties.
Arizona Line 2000 Rupture
On August 15, 2021, the 30” EPNG Line 2000 natural gas transmission pipeline ruptured in a rural area in Coolidge, Arizona. The failure resulted in a fire which destroyed a home, resulting in two fatalities and one injury. The National Transportation Safety Board investigated the incident and issued its report on April 27, 2023. EPNG completed the physical work on Line 2000 in accordance with PHMSA’s requirements and returned the pipeline to commercial service in February 2023. While no litigation is pending at this time, we notified our insurers of the incident and do not expect that the resolution of claims will have a material adverse impact to our business.
General
As of June 30, 2023 and December 31, 2022, our total reserve for legal matters was $39 million and $70 million, respectively.
Environmental Matters
We and our subsidiaries are subject to environmental cleanup and enforcement actions from time to time. In particular, CERCLA generally imposes joint and several liability for cleanup and enforcement costs on current and predecessor owners and operators of a site, among others, without regard to fault or the legality of the original conduct, subject to the right of a liable party to establish a “reasonable basis” for apportionment of costs. Our operations are also subject to local, state and federal laws and regulations relating to protection of the environment. Although we believe our operations are in substantial compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in pipeline, terminal, CO2 field and oil field, and our other operations, and there can be no assurance that we will not incur significant costs and liabilities. Moreover, it is possible that other developments could result in substantial costs and liabilities to us, such as increasingly stringent environmental laws, regulations and enforcement policies under the terms of authority of those laws, and claims for damages to property or persons resulting from our operations.
We are currently involved in several governmental proceedings involving alleged violations of local, state and federal environmental and safety regulations. As we receive notices of non-compliance, we attempt to negotiate and settle such matters where appropriate. These alleged violations may result in fines and penalties, but except as disclosed herein we do not believe any such fines and penalties will be material to our business, individually or in the aggregate. We are also currently involved in several governmental proceedings involving groundwater and soil remediation efforts under state or federal administrative orders or related remediation programs. We have established a reserve to address the costs associated with the remediation efforts.
In addition, we are involved with and have been identified as a potentially responsible party (PRP) in several federal and state Superfund sites. Environmental reserves have been established for those sites where our contribution is probable and reasonably estimable. In addition, we are from time to time involved in civil proceedings relating to damages alleged to have occurred as a result of accidental leaks or spills of refined petroleum products, crude oil, NGL, natural gas or CO2, including natural resource damage (NRD) claims.
Portland Harbor Superfund Site, Willamette River, Portland, Oregon
On January 6, 2017, the EPA issued a Record of Decision (ROD) that established a final remedy and cleanup plan for an industrialized area on the lower reach of the Willamette River commonly referred to as the Portland Harbor Superfund Site (PHSS). The cost for the final remedy is estimated to be more than $2.8 billion and active cleanup is expected to take more than 10 years to complete. KMLT, KMBT, and some 90 other PRPs identified by the EPA are involved in a non-judicial allocation process to determine each party’s respective share of the cleanup costs related to the final remedy set forth by the ROD. We are participating in the allocation process on behalf of KMLT (in connection with its ownership or operation of two facilities) and KMBT (in connection with its ownership or operation of two facilities). Effective January 31, 2020, KMLT
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entered into separate Administrative Settlement Agreements and Orders on Consent (ASAOC) to complete remedial design for two distinct areas within the PHSS associated with KMLT’s facilities. The ASAOC obligates KMLT to pay a share of the remedial design costs for cleanup activities related to these two areas as required by the ROD. Our share of responsibility for the PHSS costs will not be determined until the ongoing non-judicial allocation process is concluded or a lawsuit is filed that results in a judicial decision allocating responsibility. At this time we anticipate the non-judicial allocation process will be complete in or around December 2024. Until the allocation process is completed, we are unable to reasonably estimate the extent of our liability for the costs related to the design of the proposed remedy and cleanup of the PHSS. Because costs associated with any remedial plan are expected to be spread over at least several years, we do not anticipate that our share of the costs of the remediation will have a material adverse impact to our business.
In addition to CERCLA cleanup costs, we are reviewing and will attempt to settle, if possible, NRD claims in the amount of approximately $5 million asserted by state and federal trustees following their natural resource assessment of the PHSS.
Lower Passaic River Study Area of the Diamond Alkali Superfund Site, New Jersey
EPEC Polymers, Inc. and EPEC Oil Company Liquidating Trust (collectively EPEC) are identified as PRPs in an administrative action under CERCLA known as the Lower Passaic River Study Area (Site) concerning the lower 17-mile stretch of the Passaic River in New Jersey. On March 4, 2016, the EPA issued a Record of Decision (ROD) for the lower eight miles of the Site. At that time the cleanup plan in the ROD was estimated to cost $1.7 billion. The cleanup is expected to take at least six years to complete once it begins. In addition, the EPA and numerous PRPs, including EPEC, engaged in an allocation process for the implementation of the remedy for the lower eight miles of the Site. That process was completed December 28, 2020 and certain PRPs, including EPEC, engaged in discussions with the EPA as a result thereof. On October 4, 2021, the EPA issued a ROD for the upper nine miles of the Site. At that time, the cleanup plan in the ROD was estimated to cost $440 million. No timeline for the cleanup has been established. On December 16, 2022, the United States Department of Justice (DOJ) and EPA announced a settlement and proposed consent decree with 85 PRPs, including EPEC, to resolve their collective liability at the Site. The total amount of the settlement is $150 million. Also on December 16, 2022, the DOJ on behalf of the EPA filed a Complaint against the 85 PRPs, including EPEC, a Notice of Lodging of Consent Decree, and a Consent Decree in the U.S. District Court for the District of New Jersey. We believe our share of the costs to resolve this matter, including our share of the settlement with EPA and the costs to remediate the Site, if any, will not have a material adverse impact to our business.
Louisiana Governmental Coastal Zone Erosion Litigation
Beginning in 2013, several parishes in Louisiana and the City of New Orleans filed separate lawsuits in state district courts in Louisiana against a number of oil and gas companies, including TGP and SNG. In these cases, the parishes and New Orleans, as Plaintiffs, allege that certain of the defendants’ oil and gas exploration, production and transportation operations were conducted in violation of the State and Local Coastal Resources Management Act of 1978, as amended (SLCRMA) and that those operations caused substantial damage to the coastal waters of Louisiana and nearby lands. The Plaintiffs seek, among other relief, unspecified money damages, attorneys’ fees, interest, and payment of costs necessary to restore the affected areas. There are more than 40 of these cases pending in Louisiana against oil and gas companies, one of which is against TGP and one of which is against SNG, both described further below.
On November 8, 2013, the Parish of Plaquemines, Louisiana and others filed a petition for damages in the state district court for Plaquemines Parish, Louisiana against TGP and 17 other energy companies, alleging that the defendants’ operations in Plaquemines Parish violated SLCRMA and Louisiana law, and caused substantial damage to the coastal waters and nearby lands. Plaquemines Parish seeks, among other relief, unspecified money damages, attorney fees, interest, and payment of costs necessary to restore the allegedly affected areas. The case was effectively stayed pending the resolution of jurisdictional issues in separate, consolidated cases to which TGP is not a party; The Parish of Plaquemines, et al. vs. Chevron USA, Inc. et al. consolidated with The Parish of Cameron, et al. v. BP America Production Company, et al. Those cases were removed to federal court and subsequently remanded to the state district courts for Plaquemines and Cameron Parishes, respectively. At this time, we are not able to reasonably estimate the extent of our potential liability, if any. We intend to vigorously defend this case.
On March 29, 2019, the City of New Orleans and Orleans Parish (collectively, Orleans) and others filed a petition for damages in the state district court for Orleans Parish, Louisiana against SNG and 10 other energy companies alleging that the defendants’ operations in Orleans Parish violated the SLCRMA and Louisiana law, and caused substantial damage to the coastal waters and nearby lands. Orleans seeks, among other relief, unspecified money damages, attorney fees, interest, and payment of costs necessary to restore the allegedly affected areas. In April 2019, the case was removed to the U.S. District Court for the Eastern District of Louisiana. In January 2020, the U.S. District Court ordered the case to be stayed and
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administratively closed pending the resolution of issues in a separate case to which SNG is not a party. On May 3, 2023, the U.S. District Court re-opened the case. At this time, we are not able to reasonably estimate the extent of our potential liability, if any. We intend to vigorously defend this case.
Products Pipeline Incident, Walnut Creek, California
On November 20, 2020, SFPP identified an issue on its Line Section 16 (LS-16) which transports petroleum products in California from Concord to San Jose. We shut down the pipeline and notified the appropriate regulatory agencies of a “threatened release” of gasoline. We investigated the issue and on November 24, 2020, identified a crack in the pipeline and notified the regulatory agencies of a “confirmed release.” The damaged section of the pipeline was removed and replaced, and the pipeline resumed operations on November 26, 2020. We reported the estimated volume of gasoline released to be 8.1 Bbl. On December 2, 2020, complaints of gasoline odors were reported along the LS-16 pipeline corridor in Walnut Creek. A unified response was implemented by us along with the EPA, the California Office of Spill Prevention and Response, the California Fire Marshall, and the San Francisco Regional Water Quality Control Board. On December 8, 2020, we reported an updated estimated spill volume of up to 1,000 Bbl.
On October 28, 2021, we were informed by the California Attorney General it was contemplating criminal charges against us asserting the November 2020 discharge of gasoline affected waters of the State of California, and there was a failure to make timely notices of this discharge to appropriate state agencies. On December 16, 2021, we entered into a plea agreement with the State of California to resolve misdemeanor charges of the unintentional, non-negligent discharge of gasoline resulting from the release and the claimed failure to provide timely notices of the discharge to appropriate state agencies. Under the plea agreement, SFPP plead no-contest to two misdemeanors and paid approximately $2.5 million in fines, penalties, restitution, environmental improvement project funding, and for enforcement training in the State of California, and was placed on informal, unsupervised probation for a term of 18 months. On May 8, 2023, the California Attorney General confirmed SFPP had complied with the terms of the plea agreement.
Since the November 2020 release, we have cooperated fully with federal and state agencies and worked diligently to remediate the affected areas. There may be civil enforcement actions by federal and state agencies arising from the November 2020 release. Further, we anticipate ongoing monitoring and, where necessary, remediation under the oversight of the San Francisco Regional Water Quality Control Board until site conditions demonstrate no further actions are required. We do not anticipate the costs to resolve those enforcement matters, if any, or the costs to monitor and further remediate the site, will have a material adverse impact to our business.
General
Although it is not possible to predict the ultimate outcomes, we believe that the resolution of the environmental matters set forth in this note, and other matters to which we and our subsidiaries are a party, will not have a material adverse effect on our business. As of June 30, 2023 and December 31, 2022, we have accrued a total reserve for environmental liabilities in the amount of $212 million and $221 million, respectively. In addition, as of June 30, 2023 and December 31, 2022, we had receivables of $11 million and $12 million, respectively, recorded for expected cost recoveries that have been deemed probable.
Challenge to Federal “Good Neighbor Plan”
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10. Recent Accounting Pronouncements
Accounting Standards Updates
Reference Rate Reform (Topic 848)
On March 12, 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR). Entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met.
On January 7, 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope.” This ASU clarifies that all derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment (the “Discounting Transition”) are in the scope of Topic 848 and therefore qualify for the available temporary optional expedients and exceptions. As such, entities that employ derivatives that are the designated hedged item in a hedge relationship where perfect effectiveness is assumed can continue to apply hedge accounting without de-designating the hedging relationship to the extent such derivatives are impacted by the Discounting Transition.
On December 21, 2022, the FASB issued ASU No. 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.” This ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the optional expedients and exceptions in Topic 848.
The guidance was effective upon issuance.
During the six months ended June 30, 2023 we amended certain of our existing fixed-to-variable interest rate swap agreements, which were designated as fair value hedges, to transition the variable leg of such agreements from LIBOR to SOFR. These agreements contain a combined notional principal amount of $1,225 million and convert a portion of our fixed rate debt to variable rates. Concurrent with these amendments, we elected certain of the optional expedients provided in Topic 848 which allow us to maintain our prior designation of fair value hedge accounting to these agreements. See Note 5 “Risk Management—Interest Rate Risk Management” for more information on our interest rate risk management activities.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General and Basis of Presentation
The following discussion and analysis should be read in conjunction with our accompanying interim consolidated financial statements and related notes included elsewhere in this report, and in conjunction with (i) our consolidated financial statements and related notes in our 2022 Form 10-K; (ii) our management’s discussion and analysis of financial condition and results of operations included in our 2022 Form 10-K; (iii) “Information Regarding Forward-Looking Statements” at the beginning of this report and in our 2022 Form 10-K; and (iv) “Risk Factors” in Part II, Item 1A of this report and Part I, Item 1 in our 2022 Form 10-K.
Acquisition
Following is an acquisition we made during the six months ended June 30, 2023.
| Event | Description | Business Segment | ||||||
Diamond M Field acquisition (June 2023) | We closed on our acquisition of Parallel Petroleum’s interest in the Diamond M Field for $15 million, before working capital adjustments. The acquired field is located directly adjacent to our existing SACROC field. It is currently under waterflood, but it is expected to be very receptive to CO2 flooding given its proximity to SACROC. Implementation of enhanced oil recovery is projected to begin in 2024. | CO2 business segment (Oil and Producing activities) | ||||||
2023 Dividends and Discretionary Capital
We expect to declare dividends of $1.13 per share for 2023, a 2% increase from the 2022 declared dividends of $1.11 per share. We now expect to invest $2.1 billion in expansion projects, acquisitions, and contributions to joint ventures during 2023.
The expectations for 2023 discussed above involve risks, uncertainties and assumptions, and are not guarantees of performance. Many of the factors that will determine these expectations are beyond our ability to control or predict, and because of these uncertainties, it is advisable not to put undue reliance on any forward-looking statement.
Results of Operations
Overview
As described in further detail below, our management evaluates our performance primarily using Net income attributable to Kinder Morgan, Inc. and Segment EBDA (as presented in Note 7 “Reportable Segments”) along with the non-GAAP financial measures of Adjusted Earnings and DCF, both in the aggregate and per share for each, Adjusted Segment EBDA, Adjusted EBITDA and Net Debt.
GAAP Financial Measures
The Consolidated Earnings Results for the three and six months ended June 30, 2023 and 2022 present Net income attributable to Kinder Morgan, Inc., as prepared and presented in accordance with GAAP, and Segment EBDA, which is disclosed in Note 7 “Reportable Segments” pursuant to FASB ASC 280. The composition of Segment EBDA is not addressed nor prescribed by generally accepted accounting principles. Segment EBDA is a useful measure of our operating performance because it measures the operating results of our segments before DD&A and certain expenses that are generally not controllable by our business segment operating managers, such as general and administrative expenses and corporate charges, interest expense, net, and income taxes. Our general and administrative expenses and corporate charges include such items as unallocated employee benefits, insurance, rentals, unallocated litigation and environmental expenses, and shared corporate services including accounting, information technology, human resources and legal services.
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Non-GAAP Financial Measures
Our non-GAAP financial measures described below should not be considered alternatives to GAAP Net income attributable to Kinder Morgan, Inc. or other GAAP measures and have important limitations as analytical tools. Our computations of these non-GAAP financial measures may differ from similarly titled measures used by others. You should not consider these non-GAAP financial measures in isolation or as substitutes for an analysis of our results as reported under GAAP. Management compensates for the limitations of our consolidated non-GAAP financial measures by reviewing our comparable GAAP measures identified in the descriptions of consolidated non-GAAP measures below, understanding the differences between the measures and taking this information into account in its analysis and its decision-making processes.
Certain Items
Certain Items, as adjustments used to calculate our non-GAAP financial measures, are items that are required by GAAP to be reflected in Net income attributable to Kinder Morgan, Inc., but typically either (i) do not have a cash impact (for example, unsettled commodity hedges and asset impairments), or (ii) by their nature are separately identifiable from our normal business operations and in most cases are likely to occur only sporadically (for example, certain legal settlements, enactment of new tax legislation and casualty losses). (See the tables included in “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to Adjusted Earnings,” “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to DCF” and “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to Adjusted EBITDA” below). We also include adjustments related to joint ventures (see “Amounts from Joint Ventures” below). The following table summarizes our Certain Items for the three and six months ended June 30, 2023 and 2022, which are also described in more detail in the footnotes to tables included in “—Segment Earnings Results” below.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Certain Items | |||||||||||||||||||||||
| Fair value amortization | $ | 4 | $ | (3) | $ | — | $ | (7) | |||||||||||||||
| Change in fair value of derivative contracts(a) | (62) | (27) | (130) | 55 | |||||||||||||||||||
| Loss on impairment | — | — | 67 | — | |||||||||||||||||||
| Income tax Certain Items(b) | 12 | 5 | 13 | (15) | |||||||||||||||||||
| Other | — | 11 | — | 18 | |||||||||||||||||||
| Total Certain Items(c)(d) | $ | (46) | $ | (14) | $ | (50) | $ | 51 | |||||||||||||||
(a)Gains or losses are reflected when realized.
(b)Represents the income tax provision on Certain Items plus discrete income tax items. Includes the impact of KMI’s income tax provision on Certain Items affecting earnings from equity investments and is separate from the related tax provision recognized at the investees by the joint ventures which are also taxable entities.
(c)Amounts for the periods ending June 30, 2023 and 2022 include the following amounts reported within “Earnings from equity investments” on the accompanying consolidated statements of income: (i) $1 million and none for the three-month periods, respectively, and $(1) million and $5 million for the six-month periods, respectively, included within “Change in fair value of derivative contracts” and (ii) $67 million for the 2023 six-month period only included within “Loss on impairment” for a non-cash impairment related to our investment in Double Eagle Pipeline LLC in our Products Pipelines business segment (see Note 2 “Losses on Impairments—Impairments”).
(d)Amounts for the periods ending June 30, 2023 and 2022 include, in the aggregate, $(5) million and $(17) million for the three-month periods, respectively, and $(13) million and $(61) million for the six-month periods, respectively, included within “Interest, net” on the accompanying consolidated statements of income which consist of (i) $4 million and $(3) million for the three-month periods, respectively, and none and $(7) million for the six-month periods, respectively, of “Fair value amortization” and (ii) $(9) million and $(14) million for the three-month periods, respectively, and $(13) million and $(54) million for the six-month periods, respectively, of “Change in fair value of derivative contracts.”
Adjusted Earnings
Adjusted Earnings is calculated by adjusting Net income attributable to Kinder Morgan, Inc. for Certain Items. Adjusted Earnings is used by us, investors and other external users of our financial statements as a supplemental measure that provides decision-useful information regarding our period-over-period performance and ability to generate earnings that are core to our
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ongoing operations. We believe the GAAP measure most directly comparable to Adjusted Earnings is Net income attributable to Kinder Morgan, Inc. Adjusted Earnings per share uses Adjusted Earnings and applies the same two-class method used in arriving at basic earnings per share. See “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to Adjusted Earnings” below.
DCF
DCF is calculated by adjusting Net income attributable to Kinder Morgan, Inc. for Certain Items, and further for DD&A and amortization of excess cost of equity investments, income tax expense, cash taxes, sustaining capital expenditures and other items. We also adjust amounts from joint ventures for income taxes, DD&A, cash taxes and sustaining capital expenditures (see “Amounts from Joint Ventures” below). DCF is a significant performance measure used by us, investors and other external users of our financial statements to evaluate our performance and to measure and estimate the ability of our assets to generate economic earnings after paying interest expense, paying cash taxes and expending sustaining capital. DCF provides additional insight into the specific costs associated with our assets in the current period and facilitates period-to-period comparisons of our performance from ongoing business activities. DCF is also used by us, investors, and other external users to compare the performance of companies across our industry. DCF per share serves as the primary financial performance target for purposes of annual bonuses under our annual incentive compensation program and for performance-based vesting of equity compensation grants under our long-term incentive compensation program. DCF should not be used as an alternative to net cash provided by operating activities computed under GAAP. We believe the GAAP measure most directly comparable to DCF is Net income attributable to Kinder Morgan, Inc. DCF per share is DCF divided by average outstanding shares, including restricted stock awards that participate in dividends. See “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to DCF” below.
Adjusted Segment EBDA
Adjusted Segment EBDA is calculated by adjusting Segment EBDA for Certain Items attributable to the segment. Adjusted Segment EBDA is used by management in its analysis of segment performance and management of our business. We believe Adjusted Segment EBDA is a useful performance metric because it provides management, investors and other external users of our financial statements additional insight into performance trends across our business segments, our segments’ relative contributions to our consolidated performance and the ability of our segments to generate earnings on an ongoing basis. Adjusted Segment EBDA is also used as a factor in determining compensation under our annual incentive compensation program for our business segment presidents and other business segment employees. We believe it is useful to investors because it is a measure that management uses to allocate resources to our segments and assess each segment’s performance. See “—Non-GAAP Financial Measures—Reconciliation of Segment EBDA to Adjusted Segment EBDA” below.
Adjusted EBITDA
Adjusted EBITDA is calculated by adjusting Net income attributable to Kinder Morgan, Inc. for Certain Items and further for DD&A and amortization of excess cost of equity investments, income tax expense and interest. We also include amounts from joint ventures for income taxes and DD&A (see “Amounts from Joint Ventures” below). Adjusted EBITDA is used by management, investors and other external users, in conjunction with our Net Debt (as described further below), to evaluate our leverage. Management and external users also use Adjusted EBITDA as an important metric to compare the valuations of companies across our industry. Our ratio of Net Debt-to-Adjusted EBITDA is used as a supplemental performance target for purposes of our annual incentive compensation program. We believe the GAAP measure most directly comparable to Adjusted EBITDA is Net income attributable to Kinder Morgan, Inc. See “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to Adjusted EBITDA” below.
Amounts from Joint Ventures
Certain Items, DCF and Adjusted EBITDA reflect amounts from unconsolidated joint ventures and consolidated joint ventures utilizing the same recognition and measurement methods used to record “Earnings from equity investments” and “Noncontrolling interests,” respectively. The calculations of DCF and Adjusted EBITDA related to our unconsolidated and consolidated joint ventures include the same items (DD&A and income tax expense, and for DCF only, also cash taxes and sustaining capital expenditures) with respect to the joint ventures as those included in the calculations of DCF and Adjusted EBITDA for our wholly-owned consolidated subsidiaries; further, we remove the portion of these adjustments attributable to non-controlling interests. (See “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to DCF” and “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to Adjusted EBITDA” below.) Although these amounts related to our unconsolidated joint ventures are included in the
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calculations of DCF and Adjusted EBITDA, such inclusion should not be understood to imply that we have control over the operations and resulting revenues, expenses or cash flows of such unconsolidated joint ventures.
Net Debt
Net Debt is calculated, based on amounts as of June 30, 2023, by subtracting the following amounts from our debt balance of $31,392 million: (i) cash and cash equivalents of $497 million; (ii) debt fair value adjustments of $96 million; and (iii) the foreign exchange impact on Euro-denominated bonds of $2 million for which we have entered into currency swaps to convert that debt to U.S. dollars. Net Debt, on its own and in conjunction with our Adjusted EBITDA as part of a ratio of Net Debt-to-Adjusted EBITDA, is a non-GAAP financial measure that is used by management, investors and other external users of our financial information to evaluate our leverage. Our ratio of Net Debt-to-Adjusted EBITDA is also used as a supplemental performance target for purposes of our annual incentive compensation program. We believe the most comparable measure to Net Debt is total debt.
Consolidated Earnings Results
The following tables summarize the key components of our consolidated earnings results.
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2023 | 2022 | Earnings increase/(decrease) | |||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||
| Revenues | $ | 3,501 | $ | 5,151 | $ | (1,650) | (32) | % | |||||||||||||||
| Operating Costs, Expenses and Other | |||||||||||||||||||||||
| Costs of sales (exclusive of items shown separately below) | (971) | (2,683) | 1,712 | 64 | % | ||||||||||||||||||
| Operations and maintenance | (685) | (663) | (22) | (3) | % | ||||||||||||||||||
| DD&A | (557) | (543) | (14) | (3) | % | ||||||||||||||||||
| General and administrative | (169) | (152) | (17) | (11) | % | ||||||||||||||||||
| Taxes, other than income taxes | (103) | (116) | 13 | 11 | % | ||||||||||||||||||
| Gain on divestitures and impairments, net | 13 | 11 | 2 | 18 | % | ||||||||||||||||||
| Other income, net | 1 | 1 | — | — | % | ||||||||||||||||||
| Total Operating Costs, Expenses and Other | (2,471) | (4,145) | 1,674 | 40 | % | ||||||||||||||||||
| Operating Income | 1,030 | 1,006 | 24 | 2 | % | ||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Earnings from equity investments | 208 | 182 | 26 | 14 | % | ||||||||||||||||||
| Amortization of excess cost of equity investments | (19) | (19) | — | — | % | ||||||||||||||||||
| Interest, net | (443) | (355) | (88) | (25) | % | ||||||||||||||||||
| Other, net | 2 | 23 | (21) | (91) | % | ||||||||||||||||||
| Total Other Expense | (252) | (169) | (83) | (49) | % | ||||||||||||||||||
| Income Before Income Taxes | 778 | 837 | (59) | (7) | % | ||||||||||||||||||
| Income Tax Expense | (168) | (184) | 16 | 9 | % | ||||||||||||||||||
| Net Income | 610 | 653 | (43) | (7) | % | ||||||||||||||||||
| Net Income Attributable to Noncontrolling Interests | (24) | (18) | (6) | (33) | % | ||||||||||||||||||
| Net Income Attributable to Kinder Morgan, Inc. | $ | 586 | $ | 635 | $ | (49) | (8) | % | |||||||||||||||
| Basic and diluted earnings per share | $ | 0.26 | $ | 0.28 | $ | (0.02) | (7) | % | |||||||||||||||
| Basic and diluted weighted average shares outstanding | 2,237 | 2,265 | (28) | (1) | % | ||||||||||||||||||
| Declared dividends per share | $ | 0.2825 | $ | 0.2775 | $ | 0.005 | 2 | % | |||||||||||||||
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| Six Months Ended June 30, | |||||||||||||||||||||||
| 2023 | 2022 | Earnings increase/(decrease) | |||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||
| Revenues | $ | 7,389 | $ | 9,444 | $ | (2,055) | (22) | % | |||||||||||||||
| Operating Costs, Expenses and Other | |||||||||||||||||||||||
| Costs of sales (exclusive of items shown separately below) | (2,186) | (4,577) | 2,391 | 52 | % | ||||||||||||||||||
| Operations and maintenance | (1,324) | (1,248) | (76) | (6) | % | ||||||||||||||||||
| DD&A | (1,122) | (1,081) | (41) | (4) | % | ||||||||||||||||||
| General and administrative | (335) | (308) | (27) | (9) | % | ||||||||||||||||||
| Taxes, other than income taxes | (213) | (227) | 14 | 6 | % | ||||||||||||||||||
| Gain on divestitures and impairments, net | 13 | 21 | (8) | (38) | % | ||||||||||||||||||
| Other income, net | 2 | 6 | (4) | (67) | % | ||||||||||||||||||
| Total Operating Costs, Expenses and Other | (5,165) | (7,414) | 2,249 | 30 | % | ||||||||||||||||||
| Operating Income | 2,224 | 2,030 | 194 | 10 | % | ||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Earnings from equity investments | 373 | 369 | 4 | 1 | % | ||||||||||||||||||
| Amortization of excess cost of equity investments | (36) | (38) | 2 | 5 | % | ||||||||||||||||||
| Interest, net | (888) | (688) | (200) | (29) | % | ||||||||||||||||||
| Other, net | 4 | 42 | (38) | (90) | % | ||||||||||||||||||
| Total Other Expense | (547) | (315) | (232) | (74) | % | ||||||||||||||||||
| Income Before Income Taxes | 1,677 | 1,715 | (38) | (2) | % | ||||||||||||||||||
| Income Tax Expense | (364) | (378) | 14 | 4 | % | ||||||||||||||||||
| Net Income | 1,313 | 1,337 | (24) | (2) | % | ||||||||||||||||||
| Net Income Attributable to Noncontrolling Interests | (48) | (35) | (13) | (37) | % | ||||||||||||||||||
| Net Income Attributable to Kinder Morgan, Inc. | $ | 1,265 | $ | 1,302 | $ | (37) | (3) | % | |||||||||||||||
| Basic and diluted earnings per share | $ | 0.56 | $ | 0.57 | $ | (0.01) | (2) | % | |||||||||||||||
| Basic and diluted weighted average shares outstanding | 2,242 | 2,266 | (24) | (1) | % | ||||||||||||||||||
| Declared dividends per share | $ | 0.565 | $ | 0.555 | $ | 0.01 | 2 | % | |||||||||||||||
Our consolidated revenues include fees for transportation and other midstream services that we perform. Fluctuations in our consolidated services revenue largely reflect changes in volumes and/or in the rates we charge. Our consolidated costs of sales and sales revenues also include purchases and sales of natural gas and products (which means, collectively, NGL, crude oil, CO2 and transmix) and related derivative activity. Our consolidated sales revenue will fluctuate with commodity prices and volumes, and the associated costs of sales will usually have a commensurate and offsetting impact, except for the CO2 segment, which produces, instead of purchases, the crude oil and CO2 it sells. Additionally, fluctuations in revenues and costs of sales may be further impacted by gains or losses from derivative contracts that we use to manage our commodity price risk.
Below is a discussion of significant changes in our Consolidated Earnings Results for the comparable three and six-month periods ended June 30, 2023 and 2022:
Revenues
Revenues decreased $1,650 million and $2,055 million for the three and six months ended June 30, 2023, respectively, as compared to the respective prior year periods. The decreases were primarily due to lower natural gas sales of $1,333 million and $1,758 million, respectively, and product sales of $578 million and $801 million, respectively, driven primarily by lower commodity prices and, to a lesser extent, lower volumes, partially offset by the impact of derivative contracts used to hedge commodity sales of $230 million and $457 million, respectively, which includes both realized and unrealized gains and losses from derivatives. These decreases in revenues were offset by corresponding decreases in our costs of sales as described below under “Operating Costs, Expenses and Other—Costs of sales.”
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Operating Costs, Expenses and Other
Costs of sales
Costs of sales decreased $1,712 million and $2,391 million for the three and six months ended June 30, 2023, respectively, as compared to the respective prior year periods. The decreases were primarily due to lower costs of sales for natural gas of $1,328 million and $1,731 million, respectively, and products of $324 million and $449 million, respectively, driven primarily by lower commodity prices and, to a lesser extent, lower volumes. Costs of sales was further reduced by the impacts of derivative contracts used to hedge commodity purchases of $32 million and $175 million, respectively, which includes both realized and unrealized gains and losses from derivatives.
Operations and Maintenance
Operations and maintenance increased $22 million and $76 million for the three and six months ended June 30, 2023, respectively, as compared to the respective prior year periods. The increases were primarily driven by higher labor costs, and further in the six-month period by materials and supplies, services and fuel costs related to greater activity levels and inflation.
Other Income (Expense)
Interest, net
In the table above, we report our interest expense as “net,” meaning that we have subtracted interest income and capitalized interest from our total interest expense to arrive at one interest amount. Our interest expense, net increased $88 million and $200 million for the three and six months ended June 30, 2023, respectively, as compared to the respective prior year periods. The increases were primarily due to higher realized floating rates associated with interest rate swaps and changes in fair value of interest rate swaps.
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Non-GAAP Financial Measures
Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to Adjusted Earnings
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||||
| Net income attributable to Kinder Morgan, Inc. | $ | 586 | $ | 635 | $ | 1,265 | $ | 1,302 | |||||||||||||||
| Certain Items(a) | |||||||||||||||||||||||
| Fair value amortization | 4 | (3) | — | (7) | |||||||||||||||||||
| Change in fair value of derivative contracts | (62) | (27) | (130) | 55 | |||||||||||||||||||
| Loss on impairment | — | — | 67 | — | |||||||||||||||||||
| Income tax Certain Items | 12 | 5 | 13 | (15) | |||||||||||||||||||
| Other | — | 11 | — | 18 | |||||||||||||||||||
| Total Certain Items | (46) | (14) | (50) | 51 | |||||||||||||||||||
| Adjusted Earnings | $ | 540 | $ | 621 | $ | 1,215 | $ | 1,353 | |||||||||||||||
| Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to DCF | |||||||||||||||||||||||
| Net income attributable to Kinder Morgan, Inc. | $ | 586 | $ | 635 | $ | 1,265 | $ | 1,302 | |||||||||||||||
| Total Certain Items(b) | (46) | (14) | (50) | 51 | |||||||||||||||||||
| DD&A | 557 | 543 | 1,122 | 1,081 | |||||||||||||||||||
| Amortization of excess cost of equity investments | 19 | 19 | 36 | 38 | |||||||||||||||||||
| Income tax expense(c) | 156 | 179 | 351 | 393 | |||||||||||||||||||
| Cash taxes | (8) | (8) | (9) | (9) | |||||||||||||||||||
| Sustaining capital expenditures | (195) | (176) | (351) | (291) | |||||||||||||||||||
| Amounts from joint ventures | |||||||||||||||||||||||
| Unconsolidated joint venture DD&A | 80 | 76 | 161 | 153 | |||||||||||||||||||
| Remove consolidated joint venture partners’ DD&A | (15) | (11) | (31) | (22) | |||||||||||||||||||
| Unconsolidated joint venture income tax expense(d)(e) | 20 | 20 | 46 | 41 | |||||||||||||||||||
| Unconsolidated joint venture cash taxes(d) | (52) | (39) | (52) | (39) | |||||||||||||||||||
| Unconsolidated joint venture sustaining capital expenditures | (46) | (39) | (75) | (51) | |||||||||||||||||||
| Remove consolidated joint venture partners’ sustaining capital expenditures | 2 | 2 | 4 | 4 | |||||||||||||||||||
| Other items(f) | 18 | (11) | 33 | (20) | |||||||||||||||||||
| DCF | $ | 1,076 | $ | 1,176 | $ | 2,450 | $ | 2,631 | |||||||||||||||
| Adjusted Earnings per share | $ | 0.24 | $ | 0.27 | $ | 0.54 | $ | 0.59 | |||||||||||||||
| Weighted average shares outstanding for dividends(g) | 2,250 | 2,277 | 2,255 | 2,279 | |||||||||||||||||||
| DCF per share | $ | 0.48 | $ | 0.52 | $ | 1.09 | $ | 1.15 | |||||||||||||||
| Declared dividends per share | $ | 0.2825 | $ | 0.2775 | $ | 0.565 | $ | 0.555 | |||||||||||||||
(a)See table included in “—Overview—Non-GAAP Financial Measures—Certain Items” above.
(b)See “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to Adjusted Earnings” for a detailed listing.
(c)To avoid duplication, adjustments for income tax expense for the periods ended June 30, 2023 and 2022 exclude $12 million and $5 million for the three-month periods, respectively, and $13 million and $(15) million for the six-month periods, respectively, which amounts are already included within “Certain Items.” See table included in “—Overview—Non-GAAP Financial Measures—Certain Items” above.
(d)Associated with our Citrus, NGPL Holdings and Products (SE) Pipe Line equity investments.
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(e)Includes the tax provision on Certain Items recognized by the investees that are taxable entities. The impact of KMI’s income tax provision on Certain Items affecting earnings from equity investments is included within “Certain Items.” See table included in “—Overview—Non-GAAP Financial Measures—Certain Items” above.
(f)Includes non-cash pension expense, non-cash compensation associated with our restricted stock program and pension contributions.
(g)Includes restricted stock awards that participate in dividends.
Reconciliation of Net Income Attributable to Kinder Morgan, Inc. to Adjusted EBITDA
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Net income attributable to Kinder Morgan, Inc. | $ | 586 | $ | 635 | $ | 1,265 | $ | 1,302 | |||||||||||||||
| Certain Items(a) | |||||||||||||||||||||||
| Fair value amortization | 4 | (3) | — | (7) | |||||||||||||||||||
| Change in fair value of derivative contracts | (62) | (27) | (130) | 55 | |||||||||||||||||||
| Loss on impairment | — | — | 67 | — | |||||||||||||||||||
| Income tax Certain Items | 12 | 5 | 13 | (15) | |||||||||||||||||||
| Other | — | 11 | — | 18 | |||||||||||||||||||
| Total Certain Items | (46) | (14) | (50) | 51 | |||||||||||||||||||
| DD&A | 557 | 543 | 1,122 | 1,081 | |||||||||||||||||||
| Amortization of excess cost of equity investments | 19 | 19 | 36 | 38 | |||||||||||||||||||
| Income tax expense(b) | 156 | 179 | 351 | 393 | |||||||||||||||||||
| Interest, net(c) | 448 | 372 | 901 | 749 | |||||||||||||||||||
| Amounts from joint ventures | |||||||||||||||||||||||
| Unconsolidated joint venture DD&A | 80 | 76 | 161 | 153 | |||||||||||||||||||
| Remove consolidated joint venture partners’ DD&A | (15) | (11) | (31) | (22) | |||||||||||||||||||
| Unconsolidated joint venture income tax expense(d) | 20 | 20 | 46 | 41 | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,805 | $ | 1,819 | $ | 3,801 | $ | 3,786 | |||||||||||||||
(a)See table included in “—Overview—Non-GAAP Financial Measures—Certain Items” above.
(b)To avoid duplication, adjustments for income tax expense for the periods ended June 30, 2023 and 2022 exclude $12 million and $5 million for the three-month periods, respectively, and $13 million and $(15) million for the six-month periods, respectively, which amounts are already included within “Certain Items.” See table included in “—Overview—Non-GAAP Financial Measures—Certain Items” above.
(c)To avoid duplication, adjustments for interest, net for the periods ended June 30, 2023 and 2022 exclude $(5) million and $(17) million for the three-month periods, respectively, and $(13) million and $(61) million for the six-month periods, respectively, which amounts are already included within “Certain Items.” See table included in “—Overview—Non-GAAP Financial Measures—Certain Items,” above.
(d)Includes that tax provision on Certain Items recognized by the investees that are taxable entities associated with our Citrus, NGPL Holdings and Products (SE) Pipe Line equity investments. The impact of KMI’s income tax provision on Certain Items affecting earnings from equity investments is included within “Certain Items” above.
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Below is a discussion of significant changes in our Adjusted Earnings, DCF and Adjusted EBITDA:
| Three Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Adjusted Earnings | $ | 540 | $ | 621 | $ | (81) | |||||||||||
| DCF | 1,076 | 1,176 | (100) | ||||||||||||||
| Adjusted EBITDA | 1,805 | 1,819 | (14) | ||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Adjusted Earnings | $ | 1,215 | $ | 1,353 | $ | (138) | |||||||||||
| DCF | 2,450 | 2,631 | (181) | ||||||||||||||
| Adjusted EBITDA | 3,801 | 3,786 | 15 | ||||||||||||||
Adjusted Earnings decreased $81 million and $138 million for the three and six months ended June 30, 2023, respectively, as compared to the respective prior year periods and were driven by lower commodity prices and higher interest expense. These items also affected DCF. The $100 million and $181 million decreases in DCF for the three and six months ended June 30, 2023, respectively, as compared to the respective prior year periods were further impacted by increases in sustaining capital expenditures. Adjusted EBITDA decreased $14 million and increased $15 million for the three and six months ended June 30, 2023, respectively, as compared to the respective prior year periods which were also impacted by lower commodity prices offset by, to a greater extent in the six-month period, favorable margins from our Natural Gas Pipeline business segment.
General and Administrative and Corporate Charges
| Three Months Ended June 30, | Earnings increase/(decrease) | ||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||
| General and administrative | $ | (169) | $ | (152) | $ | (17) | (11) | % | |||||||||||||||
| Corporate (charges) benefit | (10) | 8 | (18) | (225) | % | ||||||||||||||||||
| General and administrative and corporate charges | $ | (179) | $ | (144) | $ | (35) | (24) | % | |||||||||||||||
| Six Months Ended June 30, | Earnings increase/(decrease) | ||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||
| General and administrative | $ | (335) | $ | (308) | $ | (27) | (9) | % | |||||||||||||||
| Corporate (charges) benefit | (23) | 19 | (42) | (221) | % | ||||||||||||||||||
| General and administrative and corporate charges | $ | (358) | $ | (289) | $ | (69) | (24) | % | |||||||||||||||
General and administrative expenses increased $17 million and $27 million and corporate (charges) benefit increased $18 million and $42 million for the three and six months ended June 30, 2023 when compared with the respective prior year periods, respectively. The combined changes were primarily due to higher pension costs of $26 million and $48 million, and higher labor and benefit-related costs of $15 million and $24 million, for the three and six months ended June 30, 2023, respectively.
38
Reconciliation of Segment EBDA to Adjusted Segment EBDA
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Segment EBDA(a) | |||||||||||||||||||||||
| Natural Gas Pipelines Segment EBDA | $ | 1,255 | $ | 1,134 | $ | 2,750 | $ | 2,318 | |||||||||||||||
| Certain Items(b) | |||||||||||||||||||||||
| Change in fair value of derivative contracts | (54) | (12) | (119) | 94 | |||||||||||||||||||
| Other | — | 11 | — | 18 | |||||||||||||||||||
| Natural Gas Pipelines Adjusted Segment EBDA | $ | 1,201 | $ | 1,133 | $ | 2,631 | $ | 2,430 | |||||||||||||||
| Products Pipelines Segment EBDA | $ | 285 | $ | 299 | $ | 469 | $ | 598 | |||||||||||||||
| Certain Items(b) | |||||||||||||||||||||||
| Change in fair value of derivative contracts | 1 | — | 1 | — | |||||||||||||||||||
| Loss on impairment | — | — | 67 | — | |||||||||||||||||||
| Products Pipelines Adjusted Segment EBDA | $ | 286 | $ | 299 | $ | 537 | $ | 598 | |||||||||||||||
| Terminals Segment EBDA | $ | 261 | $ | 253 | $ | 515 | $ | 491 | |||||||||||||||
CO2 Segment EBDA | $ | 175 | $ | 212 | $ | 347 | $ | 404 | |||||||||||||||
| Certain Items(b) | |||||||||||||||||||||||
| Change in fair value of derivative contracts | — | (1) | 1 | 15 | |||||||||||||||||||
CO2 Adjusted Segment EBDA | $ | 175 | $ | 211 | $ | 348 | $ | 419 | |||||||||||||||
(a)Includes revenues, earnings from equity investments, operating expenses, gain on divestitures and impairments, net, other income, net, and other, net. Operating expenses include costs of sales, operations and maintenance expenses, and taxes, other than income taxes. See “—Overview—GAAP Financial Measures” above.
(b)See “—Overview—Non-GAAP Financial Measures—Certain Items” above.
39
Segment Earnings Results
Natural Gas Pipelines
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except operating statistics) | |||||||||||||||||||||||
| Revenues | $ | 1,991 | $ | 3,356 | $ | 4,457 | $ | 6,169 | |||||||||||||||
| Operating expenses | (928) | (2,374) | (2,105) | (4,158) | |||||||||||||||||||
| Gain on divestitures and impairments, net | 9 | — | 9 | — | |||||||||||||||||||
| Other income | 1 | 1 | 2 | 2 | |||||||||||||||||||
| Earnings from equity investments | 175 | 149 | 375 | 303 | |||||||||||||||||||
| Other, net | 7 | 2 | 12 | 2 | |||||||||||||||||||
| Segment EBDA | 1,255 | 1,134 | 2,750 | 2,318 | |||||||||||||||||||
| Certain Items: | |||||||||||||||||||||||
| Change in fair value of derivative contracts | (54) | (12) | (119) | 94 | |||||||||||||||||||
| Other | — | 11 | — | 18 | |||||||||||||||||||
| Certain Items(a) | (54) | (1) | (119) | 112 | |||||||||||||||||||
| Adjusted Segment EBDA | $ | 1,201 | $ | 1,133 | $ | 2,631 | $ | 2,430 | |||||||||||||||
| Change from prior period | Increase/(Decrease) | ||||||||||||||||||||||
| Segment EBDA | $ | 121 | $ | 432 | |||||||||||||||||||
| Adjusted Segment EBDA | $ | 68 | $ | 201 | |||||||||||||||||||
| Volumetric data(b) | |||||||||||||||||||||||
| Transport volumes (BBtu/d) | 39,173 | 37,465 | 39,783 | 38,387 | |||||||||||||||||||
| Sales volumes (BBtu/d) | 2,220 | 2,579 | 2,169 | 2,547 | |||||||||||||||||||
| Gathering volumes (BBtu/d) | 3,518 | 2,944 | 3,398 | 2,856 | |||||||||||||||||||
| NGLs (MBbl/d) | 34 | 30 | 33 | 31 | |||||||||||||||||||
(a)See table included in “—Overview—Non-GAAP Financial Measures—Certain Items” above. For the periods ending June 30, 2023 and 2022 Certain Items of (i) $(55) million and $(12) million for the three-month periods, respectively, and $(118) million and $89 million for the six-month periods, respectively, are associated with our Midstream business; (ii) $1 million and none for the three-month periods, respectively, and $(1) million and $5 million for the six-month periods, respectively, are associated with our East business; and (iii) none and $11 million for the three-month periods, respectively, and none and $18 million for the six-month periods, respectively, are associated with our West business. For more detail of significant Certain Items, see the discussion of changes in Segment EBDA below.
(b)Joint venture throughput is reported at our ownership share. Volumes for assets sold are excluded for all periods presented.
40
Below are the changes in Segment EBDA:
| Three Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Midstream | $ | 394 | $ | 340 | $ | 54 | |||||||||||
| East | 645 | 599 | 46 | ||||||||||||||
| West | 216 | 195 | 21 | ||||||||||||||
| Total Natural Gas Pipelines Segment EBDA | $ | 1,255 | $ | 1,134 | $ | 121 | |||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Midstream | $ | 934 | $ | 623 | $ | 311 | |||||||||||
| East | 1,341 | 1,246 | 95 | ||||||||||||||
| West | 475 | 449 | 26 | ||||||||||||||
| Total Natural Gas Pipelines Segment EBDA | $ | 2,750 | $ | 2,318 | $ | 432 | |||||||||||
The changes in Segment EBDA for our Natural Gas Pipelines business segment in the comparable three and six-month periods ended June 30, 2023 and 2022 are explained by the following discussion:
•The $54 million (16%) and $311 million (50%) increases, respectively, in Midstream were affected by period-over-period decreases in costs of sales and, to a lesser extent, in revenues related to the impacts of non-cash mark-to-market derivative contracts used to hedge forecasted commodity sales and purchases, which we treated as Certain Items.
In addition, Midstream was favorably impacted by (i) higher sales margins on our Texas intrastate natural gas pipeline operations largely driven by realized gains on sales hedges partially offset by lower sales volumes; (ii) higher commodity sales margin driven primarily by higher volumes on our Altamont asset; and (iii) higher volumes partially offset by overall lower rates on our KinderHawk assets. These impacts were partially offset by lower service fee revenues and lower deficiency revenues as a result of renegotiated contracts at lower rates on our South Texas assets. Overall, Midstream’s revenue changes are partially offset by corresponding changes in costs of sales.
•The $46 million (8%) and $95 million (8%) increases, respectively, in East were primarily due to higher equity earnings from Midcontinent Express Pipeline LLC, driven by new customer contracts entered into in the later part of 2022, higher revenues on our Stagecoach assets as a result of increased demand in its services due to favorable pricing and higher revenues on TGP primarily due to increased rates on capacity sales.
•The $21 million (11%) and $26 million (6%) increases, respectively, in West were primarily due to higher earnings from EPNG due to (i) increased revenues from the return of a pipeline segment to service in February 2023 and (ii) an increase in gas sales margin, partially offset by lower revenues from Cheyenne Plains Gas Pipeline Company, L.L.C. and Wyoming Interstate Company, L.L.C., principally resulting from contract expirations in December 2022.
In addition, the West was affected by costs associated with the EPNG pipeline rupture for the 2022 periods only, which we treated as Certain Items.
41
Products Pipelines
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except operating statistics) | |||||||||||||||||||||||
| Revenues | $ | 735 | $ | 996 | $ | 1,403 | $ | 1,762 | |||||||||||||||
| Operating expenses | (474) | (717) | (914) | (1,214) | |||||||||||||||||||
| Gain on divestitures and impairments, net | — | — | — | 12 | |||||||||||||||||||
| Earnings (loss) from equity investments | 24 | 20 | (20) | 38 | |||||||||||||||||||
| Segment EBDA | 285 | 299 | 469 | 598 | |||||||||||||||||||
| Certain Items: | |||||||||||||||||||||||
| Change in fair value of derivative contracts | 1 | — | 1 | — | |||||||||||||||||||
| Loss on impairment | — | — | 67 | — | |||||||||||||||||||
| Certain Items(a) | 1 | — | 68 | — | |||||||||||||||||||
| Adjusted Segment EBDA | $ | 286 | $ | 299 | $ | 537 | $ | 598 | |||||||||||||||
| Change from prior period | Increase/(Decrease) | ||||||||||||||||||||||
| Segment EBDA | $ | (14) | $ | (129) | |||||||||||||||||||
| Adjusted Segment EBDA | $ | (13) | $ | (61) | |||||||||||||||||||
| Volumetric data(b) | |||||||||||||||||||||||
| Gasoline(c) | 1,004 | 1,017 | 976 | 979 | |||||||||||||||||||
| Diesel fuel | 356 | 372 | 342 | 371 | |||||||||||||||||||
| Jet fuel | 290 | 267 | 281 | 255 | |||||||||||||||||||
| Total refined product volumes | 1,650 | 1,656 | 1,599 | 1,605 | |||||||||||||||||||
| Crude and condensate | 495 | 478 | 477 | 482 | |||||||||||||||||||
| Total delivery volumes (MBbl/d) | 2,145 | 2,134 | 2,076 | 2,087 | |||||||||||||||||||
(a)See table included in “—Overview—Non-GAAP Financial Measures—Certain Items” above. 2023 and 2022 Certain Items of (i) $1 million and $(1) million, respectively, for both the three-month and six-month periods are associated with our Southeast Refined Products business and (ii) none and $1 million for the three-month periods, respectively, and $67 million and $1 million for the six-month periods, respectively, are associated with our Crude and Condensate business. For more detail of significant Certain Items, see the discussion of changes in Segment EBDA below.
(b)Joint venture throughput is reported at our ownership share.
(c)Volumes include ethanol pipeline volumes.
42
Below are the changes in Segment EBDA:
| Three Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Southeast Refined Products | $ | 63 | $ | 80 | $ | (17) | |||||||||||
| Crude and Condensate | 87 | 88 | (1) | ||||||||||||||
| West Coast Refined Products | 135 | 131 | 4 | ||||||||||||||
| Total Products Pipelines Segment EBDA | $ | 285 | $ | 299 | $ | (14) | |||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Southeast Refined Products | $ | 134 | $ | 153 | $ | (19) | |||||||||||
| Crude and Condensate | 92 | 177 | (85) | ||||||||||||||
| West Coast Refined Products | 243 | 268 | (25) | ||||||||||||||
| Total Products Pipelines Segment EBDA | $ | 469 | $ | 598 | $ | (129) | |||||||||||
The changes in Segment EBDA for our Products Pipelines business segment in the comparable three and six-month periods ended June 30, 2023 and 2022 are explained by the following discussion:
•The $17 million (21%) and $19 million (12%) decreases, respectively, in Southeast Refined Products were driven by lower earnings at our Transmix processing operations primarily due to lower prices, partially offset by higher volumes and a rate escalation on Central Florida Pipeline LLC.
•The $1 million (1%) and $85 million (48%) decreases, respectively, in Crude and Condensate was affected by a year-to-date decrease of $67 million to equity earnings for a non-cash impairment related to our investment in Double Eagle Pipeline LLC, which we treated as a Certain Item.
In addition, Crude and Condensate was unfavorably impacted by (i) lower earnings from Kinder Morgan Crude & Condensate pipeline driven primarily by a decrease in revenues as a result of re-contracting at lower rates and lower deficiency revenues and (ii) from our Double H pipeline due to lower volumes. These impacts were partially offset by (i) an increase in equity earnings, excluding the impairment discussed above, from Double Eagle Pipeline LLC due to an increase in deficiency revenues and volumes and (ii) higher earnings from our KM Condensate Processing facility as a result of rate escalations. Our Crude and Condensate business also had lower revenues with a corresponding decrease in costs of sales, resulting from decreased commodity pricing and lower volumes.
•The $4 million (3%) increase and $25 million (9%) decrease, respectively, in West Coast Refined Products were impacted by increased revenues from our Pacific operations as a result of new contracts and from Calnev Pipe Line LLC driven by higher rates, both reduced by higher operating costs driven, to a greater extent in the six-month period, by net changes in product gains and losses. The year-to-date decrease was further impacted by a gain on sale of land in the 2022 period at Calnev Pipe Line LLC.
43
Terminals
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except operating statistics) | |||||||||||||||||||||||
| Revenues | $ | 478 | $ | 450 | $ | 939 | $ | 880 | |||||||||||||||
| Operating expenses | (224) | (216) | (434) | (415) | |||||||||||||||||||
Gain on divestitures and impairments, net | 3 | 12 | 3 | 9 | |||||||||||||||||||
| Other income | — | — | — | 4 | |||||||||||||||||||
| Earnings from equity investments | 2 | 4 | 4 | 8 | |||||||||||||||||||
| Other, net | 2 | 3 | 3 | 5 | |||||||||||||||||||
| Segment EBDA | $ | 261 | $ | 253 | $ | 515 | $ | 491 | |||||||||||||||
| Change from prior period | Increase/(Decrease) | ||||||||||||||||||||||
| Segment EBDA | $ | 8 | $ | 24 | |||||||||||||||||||
| Volumetric data(a) | |||||||||||||||||||||||
| Liquids leasable capacity (MMBbl) | 78.6 | 78.2 | 78.6 | 78.2 | |||||||||||||||||||
| Liquids leased capacity %(b) | 93.6 | % | 91.4 | % | 93.2 | % | 91.0 | % | |||||||||||||||
| Bulk transload tonnage (MMtons) | 13.7 | 13.7 | 27.1 | 26.7 | |||||||||||||||||||
(a)Volumes for facilities divested, idled and/or held for sale are excluded for all periods presented.
(b)The ratio of our tankage capacity in service to liquids leasable capacity.
For purposes of the following tables and related discussions, the results of operations of our terminals held for sale or divested, including any associated gain or loss on sale, are reclassified for all periods presented from the historical business grouping below and included within the All others group.
44
Below are the changes in Segment EBDA:
| Three Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Marine operations | $ | 44 | $ | 34 | $ | 10 | |||||||||||
| Southeast | 13 | 9 | 4 | ||||||||||||||
| Gulf Central | 38 | 35 | 3 | ||||||||||||||
| All others (including intrasegment eliminations) | 166 | 175 | (9) | ||||||||||||||
| Total Terminals Segment EBDA | $ | 261 | $ | 253 | $ | 8 | |||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Marine operations | $ | 85 | $ | 72 | $ | 13 | |||||||||||
| Southeast | 22 | 16 | 6 | ||||||||||||||
| Gulf Central | 76 | 67 | 9 | ||||||||||||||
| All others (including intrasegment eliminations) | 332 | 336 | (4) | ||||||||||||||
| Total Terminals Segment EBDA | $ | 515 | $ | 491 | $ | 24 | |||||||||||
The changes in Segment EBDA for our Terminals business segment in the comparable three and six-month periods ended June 30, 2023 and 2022 are explained by the following discussion:
•The $10 million (29%) and $13 million (18%) increases, respectively, in Marine operations were primarily due to higher average charter rates.
•The $4 million (44%) and $6 million (38%) increases, respectively, in the Southeast terminals were primarily due to improved pricing and margin as well as additional services added in our steel handling business.
•The $3 million (9%) and $9 million (13%) increases, respectively, in the Gulf Central terminals were primarily due to higher revenues resulting from contractual rate escalations and higher volumes for petroleum coke handling activities.
45
CO2
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except operating statistics) | |||||||||||||||||||||||
| Revenues | $ | 302 | $ | 343 | $ | 599 | $ | 648 | |||||||||||||||
| Operating expenses | (135) | (140) | (267) | (265) | |||||||||||||||||||
| Gain on divestitures and impairments, net | 1 | — | 1 | 1 | |||||||||||||||||||
| Earnings from equity investments | 7 | 9 | 14 | 20 | |||||||||||||||||||
| Segment EBDA | 175 | 212 | 347 | 404 | |||||||||||||||||||
| Certain Items: | |||||||||||||||||||||||
| Change in fair value of derivative contracts | — | (1) | 1 | 15 | |||||||||||||||||||
| Certain Items(a) | — | (1) | 1 | 15 | |||||||||||||||||||
| Adjusted Segment EBDA | $ | 175 | $ | 211 | $ | 348 | $ | 419 | |||||||||||||||
| Change from prior period | Increase/(Decrease) | ||||||||||||||||||||||
| Segment EBDA | $ | (37) | $ | (57) | |||||||||||||||||||
| Adjusted Segment EBDA | $ | (36) | $ | (71) | |||||||||||||||||||
| Volumetric data | |||||||||||||||||||||||
| SACROC oil production | 21.81 | 19.67 | 20.37 | 19.47 | |||||||||||||||||||
| Yates oil production | 6.55 | 6.35 | 6.65 | 6.57 | |||||||||||||||||||
| Other | 2.46 | 2.82 | 2.53 | 2.86 | |||||||||||||||||||
| Total oil production, net (MBbl/d)(b) | 30.82 | 28.84 | 29.55 | 28.90 | |||||||||||||||||||
| NGL sales volumes, net (MBbl/d)(b) | 9.24 | 9.24 | 8.70 | 9.33 | |||||||||||||||||||
CO2 sales volumes, net (Bcf/d) | 0.342 | 0.350 | 0.352 | 0.361 | |||||||||||||||||||
| Realized weighted average oil price ($ per Bbl) | $ | 67.73 | $ | 68.92 | $ | 67.45 | $ | 67.91 | |||||||||||||||
| Realized weighted average NGL price ($ per Bbl) | $ | 31.22 | $ | 41.86 | $ | 32.54 | $ | 42.77 | |||||||||||||||
(a)See table included in “—Overview—Non-GAAP Financial Measures—Certain Items” above. Three and six months ended June 2023 and 2022 Certain Items are associated with our Oil and Gas Producing activities. For more detail of significant Certain Items, see the discussion of changes in Segment EBDA below.
(b)Net of royalties and outside working interests.
Below are the changes in Segment EBDA:
| Three Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Source and Transportation activities | $ | 39 | $ | 69 | $ | (30) | |||||||||||
| Oil and Gas Producing activities | 135 | 137 | (2) | ||||||||||||||
| Subtotal | 174 | 206 | (32) | ||||||||||||||
| Energy Transition Ventures | 1 | 6 | (5) | ||||||||||||||
Total CO2 Segment EBDA | $ | 175 | $ | 212 | $ | (37) | |||||||||||
46
| Six Months Ended June 30, | |||||||||||||||||
| 2023 | 2022 | increase/ (decrease) | |||||||||||||||
| (In millions) | |||||||||||||||||
| Source and Transportation activities | $ | 88 | $ | 131 | $ | (43) | |||||||||||
| Oil and Gas Producing activities | 253 | 263 | (10) | ||||||||||||||
| Subtotal | 341 | 394 | (53) | ||||||||||||||
| Energy Transition Ventures | 6 | 10 | (4) | ||||||||||||||
Total CO2 Segment EBDA | $ | 347 | $ | 404 | $ | (57) | |||||||||||
The changes in Segment EBDA for our CO2 business segment in the comparable three and six-month periods ended June 30, 2023 and 2022 are explained by the following discussion:
•The $30 million (43%) and $43 million (33%) decreases, respectively, in Source and Transportation activities were primarily due to lower revenues related to lower CO2 sales prices and higher operating expenses.
•The $2 million (1%) and $10 million (4%) decreases. respectively, in Oil and Gas Producing activities were primarily due to decreases in revenues related to lower realized NGL and crude oil prices and lower NGL volumes partially offset by higher crude oil volumes.
In addition, the decreases in Oil and Gas Producing activities for the three and six-month periods were affected by an unfavorable and favorable change, respectively, in revenues related to non-cash mark-to-market derivative hedge contracts, which we treated as Certain Items.
We believe that our existing hedge contracts in place within our CO2 business segment substantially mitigate commodity price sensitivities in the near-term and to a lesser extent over the following few years from price exposure. Below is a summary of our CO2 business segment hedges outstanding as of June 30, 2023:
| Remaining 2023 | 2024 | 2025 | 2026 | 2027 | |||||||||||||||||||||||||
| Crude Oil(a) | |||||||||||||||||||||||||||||
| Price ($ per Bbl) | $ | 65.17 | $ | 63.06 | $ | 62.14 | $ | 64.63 | $ | 61.49 | |||||||||||||||||||
| Volume (MBbl/d) | 25.60 | 17.20 | 10.45 | 7.20 | 0.90 | ||||||||||||||||||||||||
| NGLs | |||||||||||||||||||||||||||||
| Price ($ per Bbl) | $ | 53.95 | $ | 49.48 | |||||||||||||||||||||||||
| Volume (MBbl/d) | 4.27 | 0.78 | |||||||||||||||||||||||||||
(a)Includes West Texas Intermediate hedges.
Liquidity and Capital Resources
General
As of June 30, 2023, we had $497 million of “Cash and cash equivalents,” a decrease of $248 million from December 31, 2022. Additionally, as of June 30, 2023, we had borrowing capacity of approximately $3.9 billion under our credit facilities (discussed below in “—Short-term Liquidity”). As discussed further below, we believe our cash flows from operating activities, cash position and remaining borrowing capacity on our credit facilities are more than adequate to allow us to manage our day-to-day cash requirements and anticipated obligations.
We have consistently generated substantial cash flows from operations, providing a source of funds of $2,883 million and $2,648 million in the first six months of 2023 and 2022, respectively. The period-to-period increase is discussed below in “—Cash Flows—Operating Activities.” We primarily rely on cash flows from operations to fund our sustaining capital expenditures, dividend payments and our expansion capital expenditures; however, we may access the debt capital markets from time to time to refinance our maturing long-term debt and finance incremental investments, if any.
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We use interest rate swap agreements to convert a portion of the underlying cash flows related to our long-term fixed rate debt securities (senior notes) into variable rate debt in order to achieve our desired mix of fixed and variable rate debt. As of June 30, 2023 and December 31, 2022, approximately $4,019 million (13%) and $6,314 million (20%), respectively, of the principal amount of our debt balances were subject to variable interest rates—either as short-term or long-term variable rate debt obligations or as fixed-rate debt converted to variable rates through the use of interest rate swaps. The percentage at June 30, 2023 and December 31, 2022 includes $3,445 million and $1,250 million, respectively, of variable-to-fixed interest rate derivative contracts which expire in December 2023. For more information on our interest rate swaps, see Note 5 “Risk Management—Interest Rate Risk Management” to our consolidated financial statements.
Our board of directors declared a quarterly dividend of $0.2825 per share for the second quarter of 2023, a 2% increase over the dividend declared for the second quarter of 2022.
On January 31, 2023, we issued in a registered offering $1,500 million aggregate principal amount of 5.20% senior notes due 2033 for net proceeds of $1,485 million, which were used to repay short-term borrowings, maturing debt and for general corporate purposes.
During the first quarter, upon maturity, we repaid our 3.15% senior notes, our floating rate senior notes and our 3.45% senior notes.
Short-term Liquidity
As of June 30, 2023, our principal sources of short-term liquidity are (i) cash from operations; and (ii) our combined $4.0 billion of credit facilities with an available capacity of approximately $3.9 billion and an associated $3.5 billion commercial paper program. The loan commitments under our credit facilities can be used for working capital and other general corporate purposes and as a backup to our commercial paper program. Commercial paper borrowings reduce borrowings allowed under our credit facilities and letters of credit reduce borrowings allowed under our $3.5 billion credit facility. We provide for liquidity by maintaining a sizable amount of excess borrowing capacity under our credit facilities and, as previously discussed, have consistently generated strong cash flows from operations.
As of June 30, 2023, our $2,760 million of short-term debt consisted primarily of senior notes that mature in the next twelve months. We intend to fund our debt, as it becomes due, primarily through credit facility borrowings, commercial paper borrowings, cash flows from operations, and/or issuing new long-term debt. Our short-term debt balance as of December 31, 2022 was $3,385 million.
We had working capital (defined as current assets less current liabilities) deficits of $2,885 million and $3,127 million as of June 30, 2023 and December 31, 2022, respectively. From time to time, our current liabilities may include short-term borrowings used to finance our expansion capital expenditures, which we may periodically replace with long-term financing and/or pay down using retained cash from operations. The overall $242 million reduction in deficit from year-end 2022 was primarily due to (i) a $625 million decrease in senior notes that mature in the next twelve months; (ii) a $182 million decrease in other current liabilities, primarily related to reductions in exchange gas payables, bonus accruals and property tax; and (iii) favorable short-term fair value adjustments on derivative contracts of $136 million; partially offset by (i) a $248 million decrease in cash and cash equivalents which was used to repay a portion of senior notes that matured in the first quarter of 2023; (ii) a $254 million net unfavorable change in our accounts receivables and payables; (iii) a $112 million decrease in other current assets, primarily in exchange gas receivables and regulatory assets; and (iv) a $65 million decrease in inventories, primarily associated with gas in underground storage. Generally, our working capital balance varies due to factors such as the timing of scheduled debt payments, timing differences in the collection and payment of receivables and payables, the change in fair value of our derivative contracts, and changes in our cash and cash equivalent balances as a result of excess cash from operations after payments for investing and financing activities.
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Capital Expenditures
We account for our capital expenditures in accordance with GAAP. Additionally, we distinguish between capital expenditures as follows:
| Type of Expenditure | Physical Determination of Expenditure | |||||||
| Sustaining capital expenditures | •Investments to maintain the operational integrity and extend the useful life of our assets | |||||||
| Expansion capital expenditures (discretionary capital expenditures) | •Investments to expand throughput or capacity from that which existed immediately prior to the making or acquisition of additions or improvements | |||||||
Budgeting of maintenance capital expenditures, which we refer to as sustaining capital expenditures, is done annually on a bottom-up basis. For each of our assets, we budget for and make those sustaining capital expenditures that are necessary to maintain safe and efficient operations, meet customer needs and comply with our operating policies and applicable law. We may budget for and make additional sustaining capital expenditures that we expect to produce economic benefits such as increasing efficiency and/or lowering future expenses. Budgeting and approval of expansion capital expenditures generally occurs periodically throughout the year on a project-by-project basis in response to specific investment opportunities identified by our business segments from which we generally expect to receive sufficient returns to justify the expenditures. Assets comprising expansion capital projects could result in additional sustaining capital expenditures over time. The need for sustaining capital expenditures in respect of newly constructed assets tends to be minimal, but tends to increase over time as such assets age and experience wear and tear. Regardless of whether assets result from sustaining or expansion capital expenditures, once completed, the addition of such assets to our depreciable asset base will impact our calculation of depreciation, depletion and amortization over the remaining useful lives of the impacted or resulting assets.
Generally, the determination of whether a capital expenditure is classified as sustaining or as expansion is made on a project level. The classification of our capital expenditures as expansion capital expenditures or as sustaining capital expenditures is made consistent with our accounting policies and is generally a straightforward process, but in certain circumstances can be a matter of management judgment and discretion. The classification has an impact on DCF because capital expenditures that are classified as expansion capital expenditures are not deducted in calculating DCF, while those classified as sustaining capital expenditures are.
Our capital expenditures for the six months ended June 30, 2023, and the amount we expect to spend for the remainder of 2023 to sustain our assets and expand our business are as follows:
Six Months Ended June 30, 2023 | 2023 Remaining | Total 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Capital expenditures: | |||||||||||||||||
| Sustaining capital expenditures | $ | 351 | $ | 534 | $ | 885 | |||||||||||
| Expansion capital expenditures | 779 | 1,057 | 1,836 | ||||||||||||||
| Accrued capital expenditures, contractor retainage and other | (88) | — | — | ||||||||||||||
| Capital expenditures | $ | 1,042 | $ | 1,591 | $ | 2,721 | |||||||||||
| Add: | |||||||||||||||||
| Sustaining capital expenditures of unconsolidated joint ventures(a) | $ | 75 | $ | 79 | $ | 154 | |||||||||||
| Investments in unconsolidated joint ventures(b) | 134 | 124 | 258 | ||||||||||||||
| Less: Consolidated joint venture partners’ sustaining capital expenditures | (4) | (7) | (11) | ||||||||||||||
| Less: Consolidated joint venture partners’ expansion capital expenditures | (6) | (14) | (20) | ||||||||||||||
| Acquisition | 14 | — | 14 | ||||||||||||||
| Accrued capital expenditures, contractor retainage and other | 88 | — | — | ||||||||||||||
| Total capital investments | $ | 1,343 | $ | 1,773 | $ | 3,116 | |||||||||||
(a)Sustaining capital expenditures by our joint ventures generally do not require cash outlays by us.
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(b)Reflects cash contributions to unconsolidated joint ventures. Also includes contributions to an unconsolidated joint venture that are netted within the amount the joint venture declares as a distribution to us.
Our capital investments consist of the following:
Six Months Ended June 30, 2023 | 2023 Remaining | Total 2023 | ||||||||||||||||||
| (In millions) | ||||||||||||||||||||
| Sustaining capital investments | ||||||||||||||||||||
| Capital expenditures for property, plant and equipment | $ | 351 | $ | 534 | $ | 885 | ||||||||||||||
| Sustaining capital expenditures of unconsolidated joint ventures(a) | 75 | 79 | 154 | |||||||||||||||||
| Less: Consolidated joint venture partners’ sustaining capital expenditures | (4) | (7) | (11) | |||||||||||||||||
| Total sustaining capital investments | 422 | 606 | 1,028 | |||||||||||||||||
| Expansion capital investments | ||||||||||||||||||||
| Capital expenditures for property, plant and equipment | 779 | 1,057 | 1,836 | |||||||||||||||||
| Investments in unconsolidated joint ventures(b) | 134 | 124 | 258 | |||||||||||||||||
| Less: Consolidated joint venture partners’ expansion capital expenditures | (6) | (14) | (20) | |||||||||||||||||
| Acquisition | 14 | — | 14 | |||||||||||||||||
| Total expansion capital investments | 921 | 1,167 | 2,088 | |||||||||||||||||
| Total capital investments | $ | 1,343 | $ | 1,773 | $ | 3,116 | ||||||||||||||
(a)Sustaining capital expenditures by our joint ventures generally do not require cash outlays by us.
(b)Reflects cash contributions to unconsolidated joint ventures. Also includes contributions to an unconsolidated joint venture that are netted within the amount the joint venture declares as a distribution to us.
Impact of Regulation
The trend toward increasingly stringent regulations creates uncertainty regarding our capital and operating expenditure requirements over the longer term. For example, on June 5, 2023, the EPA’s final rule known as the “Good Neighbor Plan” (the Plan) was published in the federal register as a final rule. As part of the Plan, the EPA disapproved 19 state implementation plans (SIPs) under the interstate transport (good neighbor) provisions of the Clean Air Act for the 2015 Ozone National Ambient Air Quality Standards and issued prescriptive emission standards for several sectors, including new and existing internal combustion engines of a certain size used in pipeline transportation of natural gas.
Multiple legal challenges have already been filed, including by us. See Note 9, “Litigation and Environmental—Environmental Matters—Challenge to Federal “Good Neighbor Plan,” to our consolidated financial statements. While we are unable to predict whether any legal challenges will result in changes to the Plan or how those changes, if any, would impact us, we believe that the EPA’s disapprovals of the SIPs were improper, that the Plan is deeply flawed and that numerous meritorious bases for challenging the Plan exist. Several states in which we have affected assets, including Arkansas, Kentucky, Louisiana, Mississippi, Missouri, Oklahoma and Texas, have appealed the EPA’s disapprovals of SIPs and requested stays pending appeal. The criteria for a stay pending appeal include a requirement that the applicant show likelihood of success on the merits. Stays pending appeal have been granted with respect to the EPA’s disapprovals of SIPs submitted by Arkansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Nevada and Texas, meaning that (for as long as the stays remain in place) the EPA no longer has a legal basis to enforce the Plan in these states. Guidance issued by the EPA on June 1, 2023 indicates the Plan’s requirements will not take effect as to sources in Arkansas, Kentucky, Louisiana, Mississippi, Missouri and Texas while the stays of the SIP disapproval action remain in place. If the Plan were fully implemented, its emission standards would require installation of more stringent air pollution controls on hundreds of existing internal combustion engines used by our Natural Gas Pipelines business segment. The Plan would require that all impacted engines meet the stringent emission limits by May 1, 2026 unless compliance schedule extensions are granted by the EPA, which would need to be supported by us and approved by the EPA on an engine-by-engine basis. If the Plan were to remain in effect in its current form (including full compliance by its May 1, 2026 compliance deadline, and assuming failure of all pending challenges to SIP disapprovals and no successful challenge to the Plan), we currently estimate that it would have a material impact on us, including estimated costs necessary to comply with the Plan ranging from $1.5 billion to $1.8 billion (including costs for joint ventures that we operate, net to our interests in such joint ventures), potential shortages of equipment resulting in our inability to comply with the Plan, and
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operational disruptions. However, impacts are difficult to predict, particularly given the extensive pending litigation. The outcomes of these numerous lawsuits may significantly decrease our exposure. For example, our currently estimated costs necessary to comply with the Plan associated with states that have not challenged disapproval of their SIPs range from $200 million to $300 million. However, successful challenges to the Plan would impact all states. In addition, we would seek to mitigate the impacts and to recover expenditures through adjustments to our rates on our regulated assets where available.
The cost estimates discussed above are preliminary, based on a number of assumptions and subject to significant variation, including outside of the ranges provided. Costs are assumed based on the average cost incurred historically for a typical retrofit of an average engine. These estimates reflect only the anticipated upgrades that would need to be performed (and in the case of joint ventures, only on assets that we operate) and do not take into account potential complications such as additional maintenance requirements that may be identified during the upgrade process.
Off Balance Sheet Arrangements
There have been no material changes in our obligations with respect to other entities that are not consolidated in our financial statements that would affect the disclosures presented as of December 31, 2022 in our 2022 Form 10-K.
Commitments for the purchase of property, plant and equipment as of June 30, 2023 and December 31, 2022 were $553 million and $527 million, respectively. The increase of $26 million was primarily driven by capital commitments related to our Natural Gas Pipelines segment.
Cash Flows
The following table summarizes our net cash flows provided by (used in) operating, investing and financing activities between 2023 and 2022.
| Six Months Ended June 30, | ||||||||||||||||||||
| 2023 | 2022 | Changes | ||||||||||||||||||
| (In millions) | ||||||||||||||||||||
| Net Cash Provided by (Used in) | ||||||||||||||||||||
| Operating activities | $ | 2,883 | $ | 2,648 | $ | 235 | ||||||||||||||
| Investing activities | (1,086) | (672) | (414) | |||||||||||||||||
| Financing activities | (2,071) | (2,706) | 635 | |||||||||||||||||
| Net Decrease in Cash, Cash Equivalents and Restricted Deposits | $ | (274) | $ | (730) | $ | 456 | ||||||||||||||
Operating Activities
$235 million more cash provided by operating activities in the comparable six-month periods ended June 30, 2023 and 2022 is explained by the following discussion:
•a $411 million increase in cash associated with net changes in working capital items and other non-current assets and liabilities. The increase was primarily driven by (i) net favorable changes related to the timing of accounts receivable collections and trade payable payments, largely in our Natural Gas business segment; and (ii) a decrease in inventories primarily driven by higher settlements associated with commodity hedges related to gas in underground storage and lower market prices and volumes with crude and transmix inventories; partially offset by,
•a $176 million decrease in cash after adjusting the $24 million decrease in net income by $152 million for the combined effects of the period-to-period net changes in non-cash items.
Investing Activities
$414 million more cash used in investing activities in the comparable six-month periods ended June 30, 2023 and 2022 is explained by the following discussion:
•a $263 million increase in capital expenditures primarily driven by the expansion projects in our Natural Gas business segment; and
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•a $116 million increase in cash used for contributions to equity investees driven primarily by higher contributions to Permian Highway Pipeline LLC in the 2023 period compared with the 2022 period, and contributions in 2023 to our newly formed equity investment, Greenholly Gathering Pipeline LLC.
Financing Activities
$635 million less cash used in financing activities in the comparable six-month periods ended June 30, 2023 and 2022 is explained by the following discussion:
•an $826 million net decrease in cash used related to debt activity as a result of lower net debt payments in the 2023 period compared to the 2022 period; partially offset by,
•a $144 million increase in cash used for share repurchases under our share buy-back program.
Dividends
We expect to declare dividends of $1.13 per share on our stock for 2023. The table below reflects our 2023 dividends declared:
| Three months ended | Total quarterly dividend per share for the period | Date of declaration | Date of record | Date of dividend | ||||||||||||||||||||||
| March 31, 2023 | $ | 0.2825 | April 19, 2023 | May 1, 2023 | May 15, 2023 | |||||||||||||||||||||
| June 30, 2023 | 0.2825 | July 19, 2023 | July 31, 2023 | August 15, 2023 | ||||||||||||||||||||||
The actual amount of dividends to be paid on our capital stock will depend on many factors, including our financial condition and results of operations, liquidity requirements, business prospects, capital requirements, legal, regulatory and contractual constraints, tax laws, Delaware laws and other factors. See Item 1A. “Risk Factors—The guidance we provide for our anticipated dividends is based on estimates. Circumstances may arise that lead to conflicts between using funds to pay anticipated dividends or to invest in our business.” of our 2022 Form 10-K. All of these matters will be taken into consideration by our board of directors when declaring dividends.
Our dividends are not cumulative. Consequently, if dividends on our stock are not paid at the intended levels, our stockholders are not entitled to receive those payments in the future. Our dividends generally will be paid on or about the 15th day of each February, May, August and November.
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Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries
KMI and certain subsidiaries (Subsidiary Issuers) are issuers of certain debt securities. KMI and substantially all of KMI’s wholly owned domestic subsidiaries (Subsidiary Guarantors), are parties to a cross guarantee agreement whereby each party to the agreement unconditionally guarantees, jointly and severally, the payment of specified indebtedness of each other party to the agreement. Accordingly, with the exception of certain subsidiaries identified as subsidiary non-guarantors (Subsidiary Non-Guarantors), the parent issuer, Subsidiary Issuers and Subsidiary Guarantors (the “Obligated Group”) are all guarantors of each series of our guaranteed debt (Guaranteed Notes). As a result of the cross guarantee agreement, a holder of any of the Guaranteed Notes issued by KMI or a Subsidiary Issuer is in the same position with respect to the net assets, and income of KMI and the Subsidiary Issuers and Guarantors. The only amounts that are not available to the holders of each of the Guaranteed Notes to satisfy the repayment of such securities are the net assets, and income of the Subsidiary Non-Guarantors.
In lieu of providing separate financial statements for the Obligated Group, we have presented the accompanying supplemental summarized combined income statement and balance sheet information for the Obligated Group based on Rule 13-01 of the SEC’s Regulation S-X. Also, see Exhibit 10.1 to this Report “Cross Guarantee Agreement, dated as of November 26, 2014, among Kinder Morgan, Inc. and certain of its subsidiaries, with schedules updated as of June 30, 2023.”
All significant intercompany items among the Obligated Group have been eliminated in the supplemental summarized combined financial information. The Obligated Group’s investment balances in Subsidiary Non-Guarantors have been excluded from the supplemental summarized combined financial information. Significant intercompany balances and activity for the Obligated Group with other related parties, including Subsidiary Non-Guarantors, (referred to as “affiliates”) are presented separately in the accompanying supplemental summarized combined financial information.
Excluding fair value adjustments, as of June 30, 2023 and December 31, 2022, the Obligated Group had $30,522 million and $30,886 million, respectively, of Guaranteed Notes outstanding.
Summarized combined balance sheet and income statement information for the Obligated Group follows:
| Summarized Combined Balance Sheet Information | June 30, 2023 | December 31, 2022 | |||||||||
| (In millions) | |||||||||||
| Current assets | $ | 2,436 | $ | 3,514 | |||||||
| Current assets - affiliates | 604 | 618 | |||||||||
| Noncurrent assets | 61,623 | 61,523 | |||||||||
| Noncurrent assets - affiliates | 525 | 516 | |||||||||
| Total Assets | $ | 65,188 | $ | 66,171 | |||||||
| Current liabilities | $ | 5,296 | $ | 6,612 | |||||||
| Current liabilities - affiliates | 671 | 707 | |||||||||
| Noncurrent liabilities | 31,193 | 30,668 | |||||||||
| Noncurrent liabilities - affiliates | 1,185 | 1,096 | |||||||||
| Total Liabilities | 38,345 | 39,083 | |||||||||
| Kinder Morgan, Inc.’s stockholders’ equity | 26,843 | 27,088 | |||||||||
| Total Liabilities and Stockholders’ Equity | $ | 65,188 | $ | 66,171 | |||||||
| Summarized Combined Income Statement Information | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | |||||||||
| (In millions) | |||||||||||
| Revenues | $ | 3,210 | $ | 6,823 | |||||||
| Operating income | 912 | 2,020 | |||||||||
| Net income | 487 | 1,100 | |||||||||
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in market risk exposures that would affect the quantitative and qualitative disclosures presented as of December 31, 2022, in Part II, Item 7A in our 2022 Form 10-K. For more information on our risk management activities, refer to Item 1, Note 5 “Risk Management” to our consolidated financial statements.
Item 4. Controls and Procedures.
As of June 30, 2023, our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon and as of the date of the evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There has been no change in our internal control over financial reporting during the quarter ended June 30, 2023 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Part I, Item 1, Note 9 to our consolidated financial statements entitled “Litigation and Environmental” which is incorporated in this item by reference.
Item 1A. Risk Factors.
Except as follows, there have been no material changes in the risk factors disclosed in Part I, Item 1A in our 2022 Form 10-K.
For more information on our risk management activities, refer to Part I, Item 1, Note 5 “Risk Management” to our consolidated financial statements.
For updates regarding the EPA’s final rule known as the “Good Neighbor Plan,” which was discussed under Item 1A in our Form 10-Q for the three months ended March 31, 2023, please refer to Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Expenditures—Impact of Regulation” and Note 9, “Litigation and Environmental—Environmental Matters—Challenge to Federal “Good Neighbor Plan,” to our consolidated financial statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Our Purchases of Our Class P Stock
(During the quarter ended June 30, 2023)
| Settlement Period | Total number of securities purchased(a) | Average price paid per security(b) | Total number of securities purchased as part of publicly announced plans(a) | Maximum number (or approximate dollar value) of securities that may yet be purchased under the plans or programs(a) | ||||||||||||||||||||||
| April 1 to April 30, 2023 | — | $ | — | — | $ | 1,944,068,674 | ||||||||||||||||||||
| May 1 to May 31, 2023 | 6,987,483 | 16.56 | 6,987,483 | 1,828,348,210 | ||||||||||||||||||||||
| June 1 to June 30, 2023 | 5,283,678 | 16.59 | 5,283,678 | 1,740,686,259 | ||||||||||||||||||||||
| Total | 12,271,161 | $ | 16.57 | 12,271,161 | $ | 1,740,686,259 | ||||||||||||||||||||
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(a)On July 19, 2017, our board of directors approved a $2 billion common share buy-back program. On January 18, 2023, our board of directors approved an increase in our share repurchase authorization to $3 billion from $2 billion. After repurchase, the shares are canceled and no longer outstanding.
(b)Amount includes any commission or other costs to repurchase shares.
Subsequent to June 30, 2023 and through July 20, 2023, we repurchased less than 1 million shares for $13 million at an average price of $16.93 per share.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Except for one terminal facility that is in temporary idle status with the Mine Safety and Health Administration, we do not own or operate mines for which reporting requirements apply under the mine safety disclosure requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). We have not received any specified health and safety violations, orders or citations, related assessments or legal actions, mining-related fatalities, or similar events requiring disclosure pursuant to the mine safety disclosure requirements of Dodd-Frank for the quarter ended June 30, 2023.
Item 5. Other Information.
During the quarter ended June 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted terminated
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Item 6. Exhibits.
| Exhibit Number | Description | |||||||
| 3.1 | ||||||||
| 10.1 | ||||||||
| 22.1 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1 | ||||||||
| 32.2 | ||||||||
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T formatted in iXBRL (Inline Extensible Business Reporting Language): (i) our Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022; (ii) our Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022; (iii) our Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022; (iv) our Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022; (v) our Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022; and (vi) the notes to our Consolidated Financial Statements. | |||||||
| 104 | Cover Page Interactive Data File pursuant to Rule 406 of Regulation S-T formatted in iXBRL (Inline Extensible Business Reporting Language) and contained in Exhibit 101. | |||||||
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| KINDER MORGAN, INC. | ||||||||
| Registrant | ||||||||
| Date: | July 21, 2023 | By: | /s/ David P. Michels | ||||||||||||||
| David P. Michels Vice President and Chief Financial Officer (principal financial and accounting officer) | |||||||||||||||||
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Exhibit 10.1
CROSS GUARANTEE AGREEMENT
This CROSS GUARANTEE AGREEMENT is dated as of November 26, 2014 (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), by each of the signatories listed on the signature pages hereto and each of the other entities that becomes a party hereto pursuant to Section 19 (the “Guarantors” and individually, a “Guarantor”), for the benefit of the Guaranteed Parties (as defined below).
W I T N E S S E T H:
WHEREAS, Kinder Morgan, Inc., a Delaware corporation (“KMI”), and certain of its direct and indirect Subsidiaries have outstanding senior, unsecured Indebtedness and may from time to time issue additional senior, unsecured Indebtedness;
WHEREAS, each Guarantor, other than KMI, is a direct or indirect Subsidiary of KMI;
WHEREAS, each Guarantor desires to provide the guarantee set forth herein with respect to the Indebtedness of such Guarantors that constitutes the Guaranteed Obligations; and
WHEREAS, each Guarantor acknowledges that it will derive substantial direct and indirect benefit from the making of the guarantees hereby;
NOW, THEREFORE, in consideration of the premises, the Guarantors hereby agree with each other for the benefit of the Guaranteed Parties as follows:
1.Defined Terms.
(a) As used in this Agreement, the following terms have the meanings specified below:
“Agreement” has the meaning provided in the preamble hereto.
“Bankruptcy Code” means Title 11 of the United States Code, as now or hereafter in effect, or any successor thereto.
“Capital Stock” means, with respect to any Person, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents (however designated) of such Person’s equity, including (i) all common stock and preferred stock, any limited or general partnership interest and any limited liability company member interest, (ii) beneficial interests in trusts, and (iii) any other interest or participation that confers upon a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person.
“CFC” means a Person that is a “controlled foreign corporation” within the meaning of Section 957 of the Internal Revenue Code of 1986, as amended.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
Exhibit 10.1
“Consolidated Assets” means, at the date of any determination thereof, the total assets of KMI and its Subsidiaries as set forth on a consolidated balance sheet of KMI and its Subsidiaries for their most recently completed fiscal quarter, prepared in accordance with GAAP.
“Consolidated Tangible Assets” means, at the date of any determination thereof, Consolidated Assets after deducting therefrom the value, net of any applicable reserves and accumulated amortization, of all goodwill, trade names, trademarks, patents and other like intangible assets, all as set forth, or on a pro forma basis would be set forth, on a consolidated balance sheet of KMI and its Subsidiaries for their most recently completed fiscal quarter, prepared in accordance with GAAP.
“Domestic Subsidiary” means any Subsidiary of KMI organized under the laws of any jurisdiction within the United States.
“Excluded Subsidiary” means (i) any Subsidiary that is not a Wholly-owned Domestic Operating Subsidiary, (ii) any Domestic Subsidiary that is a Subsidiary of a CFC or any Domestic Subsidiary (including a disregarded entity for U.S. federal income tax purposes) substantially all of whose assets (held directly or through Subsidiaries) consist of Capital Stock of one or more CFCs or Indebtedness of such CFCs, (iii) any Immaterial Subsidiary, (iv) any Subsidiary listed on Schedule III, (v) each of Calnev Pipe Line LLC, SFPP, L.P., Kinder Morgan G.P., Inc. and EPEC Realty, Inc. and each of its Subsidiaries, (vi) any other Subsidiary that is not a Guarantor under the Revolving Credit Agreement Guarantee, (vii) any not-for-profit Subsidiary, (viii) any Subsidiary that is prohibited by a Requirement of Law from guaranteeing the Guaranteed Obligations, and (ix) any Subsidiary acquired by KMI or its Subsidiaries after the date of this Agreement to the extent, and so long as, the financing documentation governing any existing Indebtedness of such Subsidiary that survives such acquisition prohibits such Subsidiary from guaranteeing the Guaranteed Obligations; provided, that notwithstanding the foregoing, any Subsidiary that is party to the Revolving Credit Agreement Guarantee or that Guarantees any senior notes or senior debt securities issued by KMI (other than pursuant to this Agreement) shall not constitute an Excluded Subsidiary for so long as such Guarantee is in effect.
“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Guarantor becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee is or becomes illegal.
“GAAP” means generally accepted accounting principles in the United States of America from time to time, including as set forth in the opinions, statements and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board.
“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra national bodies such as the European Union or the European Central Bank).
2
Exhibit 10.1
“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (iv) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.
“Guarantee Termination Date” has the meaning set forth in Section 2(d).
“Guaranteed Obligations” means the Indebtedness set forth on Schedule I hereto, as such schedule may be amended from time to time in accordance with the terms of this Agreement; provided that the term “Guaranteed Obligations” shall exclude any Excluded Swap Obligations.
“Guaranteed Parties” means, collectively, (i) in the case of Guaranteed Obligations that are governed by trust indentures, the holders (as that term is defined in the applicable trust indenture) of such Guaranteed Obligations, (ii) in the case of Guaranteed Obligations that are governed by loan agreements, credit agreements, or similar agreements, the lenders providing such loans or credit, and (iii) in the case of Guaranteed Obligations with respect to Hedging Agreements, the counterparties under such agreements.
“Guarantor” has the meaning provided in the preamble hereto. Schedule II hereto, as such schedule may be amended from time to time in accordance with the terms of this Agreement, sets forth the name of each Guarantor.
“Hedging Agreement” means a financial instrument, agreement or security which hedges or is used to hedge or manage the risk associated with a change in interest rates, foreign currency exchange rates or commodity prices (but excluding any purchase, swap, derivative contract or similar agreement relating to power, electricity or any related commodity product).
“Immaterial Subsidiary” means any Subsidiary that is not a Material Subsidiary.
“Indebtedness” means, collectively, (i) any senior, unsecured obligation created or assumed by any Person for borrowed money, including all obligations of such Person evidenced by bonds, debentures, notes or similar instruments (other than surety, performance and guaranty bonds), and (ii) all payment obligations of any Person with respect to obligations under Hedging Agreements.
“Investment Grade Rating” means a rating equal to or higher than Baa3 by Moody’s and BBB- by S&P; provided, however, that if (i) either of Moody’s or S&P changes its rating system, such ratings shall be the equivalent ratings after such changes or (ii) Moody’s or S&P shall not make a rating of a Guaranteed Obligation publicly available, the references above to Moody’s or S&P or both of them, as the case may be, shall be to a nationally recognized U.S. rating agency or agencies, as the case may be, selected by KMI and the references to the ratings categories above shall be to the corresponding rating categories of such rating agency or rating agencies, as the case may be.
“Issuer” means the issuer, borrower, or other applicable primary obligor of a Guaranteed Obligation.
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Exhibit 10.1
“KMI” has the meaning provided in the recitals hereto.
“Lien” means, with respect to any asset (i) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, and (ii) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.
“Material Subsidiary” means, as at any date of determination, any Subsidiary of KMI whose total tangible assets (for purposes of the below, when combined with the tangible assets of such Subsidiary’s Subsidiaries, after eliminating intercompany obligations) as at such date of determination are greater than or equal to 5% of Consolidated Tangible Assets as of the last day of the fiscal quarter most recently ended for which financial statements of KMI have been filed with the SEC.
“Moody’s” means Moody’s Investors Service, Inc. and its successors.
“Operating Subsidiary” means any operating company that is a Subsidiary of KMI.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Guarantor that has total assets exceeding $10,000,000 at the time the relevant Guarantee becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Rating Agencies” means Moody’s and S&P; provided that, if at the relevant time neither Moody’s nor S&P shall be rating the relevant Guaranteed Obligation, then “Rating Agencies” shall mean another nationally recognized rating service that rates such Guaranteed Obligation.
“Rating Date” means the date immediately prior to the earlier of (i) the occurrence of a Release Event and (ii) public notice of the intention to effect a Release Event.
“Rating Decline” means, with respect to a Guaranteed Obligation, the occurrence of the following on, or within 90 days after, the date of the occurrence of a Release Event or of public notice of the intention to effect a Release Event (which period may be extended so long as the rating of such Guaranteed Obligation is under publicly announced consideration for possible downgrade by either of the Rating Agencies): (i) in the event such Guaranteed Obligation is assigned an Investment Grade Rating by both Rating Agencies on the Rating Date, the rating of such Guaranteed Obligation by one or both of the Rating Agencies shall be below an Investment Grade Rating; or (ii) in the event such Guaranteed Obligation is rated below an Investment Grade Rating by either of the Rating Agencies on the Rating Date, any such below-Investment Grade Rating of such Guaranteed Obligation shall be decreased by one or more gradations (including gradations within rating categories as well as between rating categories).
“Release Event” has the meaning set forth in Section 6(b).
“Requirement of Law” means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other
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Exhibit 10.1
directive or requirement (whether or not having the force of law), including environmental laws, energy regulations and occupational, safety and health standards or controls, of any Governmental Authority.
Revolving Credit Agreement” means the Revolving Credit Agreement, dated as of September 19, 2014, among KMI, the lenders party thereto and Barclays Bank PLC, as administrative agent, as such credit agreement may be amended, modified, supplemented or restated from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid or extended from time to time (whether with the original agents and lenders or other agents or lenders or trustee or otherwise, and whether provided under the original credit agreement or other credit agreements or note indentures or otherwise), including, without limitation, increasing the amount of available borrowings or other Indebtedness thereunder.
“Revolving Credit Agreement Guarantee” means the Guarantee Agreement, dated as of November 26, 2014, made by the Subsidiaries of KMI party thereto in favor of Barclays Bank PLC, as administrative agent, for the benefit of the lenders and the issuing banks under the Revolving Credit Agreement, as such guarantee agreement may be amended, modified, supplemented or restated from time to time, and as it may be replaced or renewed from time to time in connection with any amendment, modification, supplement, restatement, refunding, refinancing, restructuring, replacement, renewal, repayment, or extension of any Revolving Credit Agreement from time to time.
“S&P” means Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc., and its successors.
“SEC” means the United States Securities and Exchange Commission.
“Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partner interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise controlled, by the parent or one or more Subsidiaries of the parent or by the parent and one or more Subsidiaries of the parent. Unless the context otherwise clearly requires, references in this Agreement to a “Subsidiary” or the “Subsidiaries” refer to a Subsidiary or the Subsidiaries of KMI. Notwithstanding the foregoing, Plantation Pipe Line Company, a Delaware and Virginia corporation, shall not be a Subsidiary of KMI until such time as its assets and liabilities, profit or loss and cash flow are required under GAAP to be consolidated with those of KMI.
“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.
“Wholly-owned Domestic Operating Subsidiary” means any Wholly-owned Subsidiary that constitutes (i) a Domestic Subsidiary and (ii) an Operating Subsidiary.
“Wholly-owned Subsidiary” means a Subsidiary of which all issued and outstanding Capital Stock (excluding in the case of a corporation, directors’ qualifying shares) is directly or indirectly owned by KMI.
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Exhibit 10.1
(b) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to Sections of this Agreement unless otherwise specified. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.
(c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
2. Guarantee.
(a) Subject to the provisions of Section 2(b), each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees, as primary obligor and not merely as surety, for the benefit of the Guaranteed Parties, the prompt and complete payment when due (whether at the stated maturity, by acceleration or otherwise) of the Guaranteed Obligations; provided that each Guarantor shall be released from its respective guarantee obligations under this Agreement as provided in Section 6(b). Upon the failure of an Issuer to punctually pay any Guaranteed Obligation, each Guarantor shall, upon written demand by the applicable Guaranteed Party to such Guarantor, pay or cause to be paid such amounts.
(b) Anything herein to the contrary notwithstanding, the maximum liability of each Guarantor hereunder shall in no event exceed the amount that can be guaranteed by such Guarantor under the Bankruptcy Code or any applicable laws relating to fraudulent conveyances, fraudulent transfers or the insolvency of debtors after giving full effect to the liability under this Agreement and its related contribution rights set forth in this Section 2, but before taking into account any liabilities under any other Guarantees.
(c) Each Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder (as a result of the limitations set forth in Section 2(b) or elsewhere in this Agreement) without impairing this Agreement or affecting the rights and remedies of any Guaranteed Party hereunder.
(d) No payment or payments made by any Issuer, any of the Guarantors, any other guarantor or any other Person or received or collected by any Guaranteed Party from any Issuer, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of any Guaranteed Obligation shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder, which shall, notwithstanding any such payment or payments, other than payments made by such Guarantor in respect of such Guaranteed Obligation or payments received or collected from such Guarantor in respect of such Guaranteed Obligation, remain liable for the Guaranteed Obligations up to the maximum liability of such Guarantor hereunder until all Guaranteed Obligations (other than any contingent indemnity obligations not then due and any letters of credit that remain outstanding which have been fully cash collateralized or otherwise back-stopped to the reasonable satisfaction of the applicable issuing bank) shall have been discharged by payment in full or shall have been deemed paid and discharged by defeasance pursuant to the terms of the instruments governing such Guaranteed Obligations (the “Guarantee Termination Date”).
(e) If and to the extent required in order for the obligations of any Guarantor hereunder to be enforceable under applicable federal, state and other laws relating to the insolvency of debtors, the maximum liability of such Guarantor hereunder shall be limited to the greatest amount which can lawfully be guaranteed by such Guarantor under such laws, after giving effect to any rights of
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Exhibit 10.1
contribution, reimbursement and subrogation arising hereunder. Each Guarantor acknowledges and agrees that, to the extent not prohibited by applicable law, (i) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right under such laws to reduce, or request any judicial relief that has the effect of reducing, the amount of its liability under this Agreement, (ii) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right to enforce the limitation set forth in this Section 2(e) or to reduce, or request judicial relief reducing, the amount of its liability under this Agreement, and (iii) the limitation set forth in this Section 2(e) may be enforced only to the extent required under such laws in order for the obligations of such Guarantor under this Agreement to be enforceable under such laws and only by or for the benefit of a creditor, representative of creditors or bankruptcy trustee of such Guarantor or other Person entitled, under such laws, to enforce the provisions hereof.
3. Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder (including by way of set-off rights being exercised against it), such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder who has not paid its proportionate share of such payment as set forth in this Section 3. To the extent that any Guarantor shall be required hereunder to pay any portion of any Guaranteed Obligation guaranteed hereunder exceeding the greater of (a) the amount of the value actually received by such Guarantor and its Subsidiaries from such Guaranteed Obligation and (b) the amount such Guarantor would otherwise have paid if such Guarantor had paid the aggregate amount of such Guaranteed Obligation guaranteed hereunder (excluding the amount thereof repaid by the Issuer of such Guaranteed Obligation) in the same proportion as such Guarantor’s net worth on the date enforcement is sought hereunder bears to the aggregate net worth of all the Guarantors on such date, then such Guarantor shall be reimbursed by such other Guarantors for the amount of such excess, pro rata, based on the respective net worth of such other Guarantors on such date; provided that any Guarantor’s right of reimbursement shall be subject to the terms and conditions of Section 5 hereof. For purposes of determining the net worth of any Guarantor in connection with the foregoing, all Guarantees of such Guarantor other than pursuant to this Agreement will be deemed to be enforceable and payable after its obligations pursuant to this Agreement. The provisions of this Section 3 shall in no respect limit the obligations and liabilities of any Guarantor to the Guaranteed Parties, and each Guarantor shall remain liable to the Guaranteed Parties for the full amount guaranteed by such Guarantor hereunder.
4. No Right of Set-off. No Guaranteed Party shall have, as a result of this Agreement, any right of set-off against any amount owing by such Guaranteed Party to or for the credit or the account of a Guarantor.
5. No Subrogation. Notwithstanding any payment or payments made by any of the Guarantors hereunder, no Guarantor shall be entitled to be subrogated to any of the rights (or if subrogated by operation of law, such Guarantor hereby waives such rights to the extent permitted by applicable law) of any Guaranteed Party against any Issuer or any other Guarantor or any collateral security or guarantee or right of offset held by any Guaranteed Party for the payment of any Guaranteed Obligation, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from any Issuer or any other Guarantor in respect of payments made by such Guarantor hereunder, until the Guarantee Termination Date. If any amount shall be paid to any Guarantor on account of such subrogation, contribution or reimbursement rights at any time prior to the Guarantee Termination Date, such amount shall be held by such Guarantor in trust for the applicable Guaranteed Parties, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the applicable Guaranteed Parties in the exact form received by such Guarantor (duly indorsed by such
7
Exhibit 10.1
Guarantor to the applicable Guaranteed Parties if required), to be applied against the applicable Guaranteed Obligation, whether due or to become due.
6. Amendments, etc. with Respect to the Guaranteed Obligations; Waiver of Rights; Release.
(a) Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, (i) any demand for payment of any Guaranteed Obligation made by any Guaranteed Party may be rescinded by such party and any Guaranteed Obligation continued, (ii) a Guaranteed Obligation, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, allowed to lapse, surrendered or released by any Guaranteed Party, (iii) the instruments governing any Guaranteed Obligation may be amended, modified, supplemented or terminated, in whole or in part, and (iv) any collateral security, guarantee or right of offset at any time held by any Guaranteed Party for the payment of any Guaranteed Obligation may be sold, exchanged, waived, allowed to lapse, surrendered or released. No Guaranteed Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Guaranteed Obligations or for this Agreement or any property subject thereto. When making any demand hereunder against any Guarantor, a Guaranteed Party may, but shall be under no obligation to, make a similar demand on the Issuer of the applicable Guaranteed Obligation or any other Guarantor or any other person, and any failure by a Guaranteed Party to make any such demand or to collect any payments from such Issuer or any other Guarantor or any other person or any release of such Issuer or any other Guarantor or any other person shall not relieve any Guarantor in respect of which a demand or collection is not made or any Guarantor not so released of its several obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of any Guaranteed Party against any Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.
(b) A Guarantor shall be automatically released from its guarantee hereunder upon release of such Guarantor from the Revolving Credit Agreement Guarantee, including upon consummation of any transaction resulting in such Guarantor ceasing to constitute a Subsidiary or upon any Guarantor becoming an Excluded Subsidiary (such transaction or event, a “Release Event”).
(c) Upon the occurrence of a Release Event, each Guaranteed Obligation for which such released Guarantor was the Issuer shall be automatically released from the provisions of this Agreement and shall cease to constitute a Guaranteed Obligation hereunder; provided that in the case of any Guaranteed Obligation that has been assigned an Investment Grade Rating by the Rating Agencies, such Guaranteed Obligation shall be so released, effective as of the 91st day after the occurrence of the Release Event, if and only if a Rating Decline with respect to such Guaranteed Obligation does not occur.
7. Guarantee Absolute and Unconditional.
(a) Each Guarantor waives any and all notice of the creation, contraction, incurrence, renewal, extension, amendment, waiver or accrual of any of the Guaranteed Obligations, and notice of or proof of reliance by any Guaranteed Party upon this Agreement or acceptance of this Agreement. To the fullest extent permitted by applicable law, each Guarantor waives diligence, promptness, presentment, protest and notice of protest, demand for payment or performance, notice of default or nonpayment, notice of acceptance and any other notice in respect of the Guaranteed Obligations or any part of them, and any defense arising by reason of any disability or other defense of any Issuer or any of the Guarantors with respect to the Guaranteed Obligations. Each Guarantor understands and agrees that this Agreement
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Exhibit 10.1
shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (i) the validity, regularity or enforceability of any of the Guaranteed Obligations, the indenture, loan agreement, note or other instrument evidencing or governing any of the Guaranteed Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by any Guaranteed Party, (ii) any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by any Issuer against any Guaranteed Party or (iii) any other circumstance whatsoever (with or without notice to or knowledge of any Issuer or such Guarantor) that constitutes, or might be construed to constitute, an equitable or legal discharge of any Issuer for any of the Guaranteed Obligations, or of such Guarantor under this Agreement, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, any Guaranteed Party may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Issuer or any other Person or against any collateral security or guarantee for the Guaranteed Obligations or any right of offset with respect thereto, and any failure by any Guaranteed Party to pursue such other rights or remedies or to collect any payments from the Issuer or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Issuer or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve such Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the other Guaranteed Parties against such Guarantor.
(b) This Agreement shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the successors and assigns thereof and shall inure to the benefit of the Guaranteed Parties and their respective successors, indorsees, transferees and assigns until the Guarantee Termination Date.
8. Reinstatement. This Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by any Guaranteed Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Issuer or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Issuer or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.
9. Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the applicable Guaranteed Parties without set-off or counterclaim in dollars.
10. Representations and Warranties. Each Guarantor hereby represents and warrants to each Guaranteed Party that the following representations and warranties are true and correct in all material respects as of the date of this Agreement or as of the date such Guarantor became a party to this Agreement, as applicable:
(a) such Guarantor (i) is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the laws of the state of its incorporation, organization or formation, (ii) has all requisite corporate, partnership, limited liability company or other power and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and (iii) is duly qualified to do business and is in good standing in every jurisdiction in which the failure to be so qualified would have a material adverse effect on its ability to perform its obligations under this Agreement;
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Exhibit 10.1
(b) such Guarantor has all requisite corporate (or other organizational) power and authority to execute and deliver and to perform its obligations under this Agreement, and all such actions have been duly authorized by all necessary proceedings on its behalf;
(c) this Agreement has been duly and validly executed and delivered by or on behalf of such Guarantor and constitutes the valid and legally binding agreement of such Guarantor, enforceable against such Guarantor in accordance with its terms, except (i) as may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance or other similar laws relating to or affecting the enforcement of creditors’ rights generally, and by general principles of equity (including principles of good faith, reasonableness, materiality and fair dealing) which may, among other things, limit the right to obtain equitable remedies (regardless of whether considered in a proceeding in equity or at law) and (ii) as to the enforceability of provisions for indemnification for violation of applicable securities laws, limitations thereon arising as a matter of law or public policy;
(d) no authorization, consent, approval, license or exemption of or registration, declaration or filing with any Governmental Authority is necessary for the valid execution and delivery of, or the performance by such Guarantor of its obligations hereunder, except those that have been obtained and such matters relating to performance as would ordinarily be done in the ordinary course of business after the date of this Agreement or as of the date such Guarantor became a party to this Agreement, as applicable; and
(e) neither the execution and delivery of, nor the performance by such Guarantor of its obligations under, this Agreement will (i) breach or violate any applicable Requirement of Law, (ii) result in any breach or violation of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of its property or assets (other than Liens created or contemplated by this Agreement) pursuant to the terms of, any indenture, mortgage, deed of trust, agreement or other instrument to which it or any of its Subsidiaries is party or by which any of its properties or assets, or those of any of its Subsidiaries is bound or to which it is subject, except for breaches, violations and defaults under clauses (i) and (ii) that neither individually nor in the aggregate could reasonably be expected to result in a material adverse effect on its ability to perform its obligations under this Agreement, or (iii) violate any provision of the organizational documents of such Guarantor.
11. Rights of Guaranteed Parties. Each Guarantor acknowledges and agrees that any changes in the identity of the Persons from time to time comprising the Guaranteed Parties gives rise to an equivalent change in the Guaranteed Parties, without any further act. Upon such an occurrence, the persons then comprising the Guaranteed Parties are vested with the rights, remedies and discretions of the Guaranteed Parties under this Agreement.
12. Notices.
(a) All notices, requests, demands and other communications to any Guarantor pursuant hereto shall be in writing and mailed, telecopied or delivered to such Guarantor in care of KMI, 1001 Louisiana Street, Suite 1000, Houston, Texas 77002, Attention: Treasurer, Telecopy: (713) 445-8302.
(b) KMI will provide a copy of this Agreement, including the most recently amended schedules and supplements hereto, to any Guaranteed Party upon written request to the address set forth in Section 12(a); provided, however, that KMI’s obligations under this Section 12(b) shall be deemed satisfied if KMI has filed a copy of this Agreement, including the most recently amended schedules and
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Exhibit 10.1
supplements hereto, with the SEC within three months preceding the date on which KMI receives such written request.
13. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile or other electronic transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with KMI.
14. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
15. Integration. This Agreement represents the agreement of each Guarantor with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Guaranteed Party relative to the subject matter hereof not expressly set forth or referred to herein.
16. Amendments; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the affected Guarantors and KMI.
(b) The Guarantors may amend or supplement this Agreement by a written instrument executed by all Guarantors:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to reflect a change in the Guarantors or the Guaranteed Obligations made in accordance with this Agreement;
(iii) to make any change that would provide any additional rights or benefits to the Guaranteed Parties or that would not adversely affect the legal rights hereunder of any Guaranteed Party in any material respect; or
(iv) to conform this Agreement to any change made to the Revolving Credit Agreement or to the Revolving Credit Agreement Guarantee.
Except as set forth in this clause (b) or otherwise provided herein, the Guarantors may not amend, supplement or otherwise modify this Agreement prior to the Guarantee Termination Date without the prior written consent of the holders of the majority of the outstanding principal amount of the Guaranteed Obligations (excluding obligations with respect to Hedging Agreements). Notwithstanding the foregoing, in the case of an amendment that would reasonably be expected to adversely, materially and disproportionately affect Guaranteed Parties with Guaranteed Obligations existing under Hedging Agreements relative to the other Guaranteed Parties, the foregoing exclusion of obligations with respect to Hedging Agreements shall not apply, and the outstanding principal amount attributable to each such Guaranteed Party’s Guaranteed Obligations shall be deemed to be equal to the termination payment that
11
Exhibit 10.1
would be due to such Guaranteed Party as if the valuation date were an “Early Termination Date” under and calculated in accordance with each applicable Hedging Agreement.
(c) No Guaranteed Party shall by any act, delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Guaranteed Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by a Guaranteed Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that such Guaranteed Party would otherwise have on any future occasion.
(d) The rights, remedies, powers and privileges herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
17. Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
18. Successors and Assigns. This Agreement shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of the Guaranteed Parties and their respective successors and permitted assigns, except that no Guarantor may assign, transfer or delegate any of its rights or obligations under this Agreement except pursuant to a transaction permitted by the Revolving Credit Agreement and in connection with a corresponding assignment under the Revolving Credit Agreement Guarantee.
19. Additional Guarantors.
(a) KMI shall cause each Subsidiary (other than any Excluded Subsidiary) formed or otherwise purchased or acquired after the date of this Agreement (including each Subsidiary that ceases to constitute an Excluded Subsidiary after the date of this Agreement) to execute a supplement to this Agreement and become a Guarantor within 45 days of the occurrence of the applicable event specified in this Section 19(a).
(b) Each Subsidiary of KMI that becomes, at the request of KMI, or that is required pursuant to Section 19(a) to become, a party to this Agreement shall become a Guarantor, with the same force and effect as if originally named as a Guarantor herein, for all purposes of this Agreement upon execution and delivery by such Subsidiary of a written supplement substantially in the form of Annex A hereto. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement.
20. Additional Guaranteed Obligations. Any Indebtedness issued by a Guarantor or for which a Guarantor otherwise becomes obligated after the date of this Agreement shall become a Guaranteed Obligation upon the execution by all Guarantors of a notation of guarantee substantially in the form of Annex B hereto, which shall be affixed to the instrument or instruments evidencing such Indebtedness. Each such notation of guarantee shall be signed on behalf of each Guarantor by a duly authorized officer prior to the authentication or issuance of such Indebtedness.
12
Exhibit 10.1
21. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
22. Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Guarantor to honor all of its obligations under this Agreement in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 22 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 22, or otherwise under this Agreement, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the Guarantee Termination Date. Each Qualified ECP Guarantor intends that this Section 22 constitute, and this Section 22 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
[Signature pages follow]
13
Exhibit 10.1
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed and delivered by its duly authorized officer or other representative as of the day and year first above written.
GUARANTORS
KINDER MORGAN, INC.
By: /s/ Anthony B. Ashley
Name: Anthony B. Ashley
Title: Treasurer
AGNES B CRANE, LLC
AMERICAN PETROLEUM TANKERS II LLC
AMERICAN PETROLEUM TANKERS III LLC
AMERICAN PETROLEUM TANKERS IV LLC
AMERICAN PETROLEUM TANKERS LLC
AMERICAN PETROLEUM TANKERS PARENT LLC
AMERICAN PETROLEUM TANKERS V LLC
AMERICAN PETROLEUM TANKERS VI LLC
AMERICAN PETROLEUM TANKERS VII LLC
APT FLORIDA LLC
APT INTERMEDIATE HOLDCO LLC
APT NEW INTERMEDIATE HOLDCO LLC
APT PENNSYLVANIA LLC
APT SUNSHINE STATE LLC
AUDREY TUG LLC
BEAR CREEK STORAGE COMPANY, L.L.C.
BETTY LOU LLC
CAMINO REAL GATHERING COMPANY, L.L.C.
CANTERA GAS COMPANY LLC
CDE PIPELINE LLC
CENTRAL FLORIDA PIPELINE LLC
CHEYENNE PLAINS GAS PIPELINE COMPANY, L.L.C.
CIG GAS STORAGE COMPANY LLC
CIG PIPELINE SERVICES COMPANY, L.L.C.
CIMMARRON GATHERING LLC
COLORADO INTERSTATE GAS COMPANY, L.L.C.
COLORADO INTERSTATE ISSUING CORPORATION
COPANO DOUBLE EAGLE LLC
COPANO ENERGY FINANCE CORPORATION
COPANO ENERGY, L.L.C.
COPANO ENERGY SERVICES/UPPER GULF COAST LLC
COPANO FIELD SERVICES GP, L.L.C.
COPANO FIELD SERVICES/NORTH TEXAS, L.L.C.
COPANO FIELD SERVICES/SOUTH TEXAS LLC
COPANO FIELD SERVICES/UPPER GULF COAST LLC
COPANO LIBERTY, LLC
COPANO NGL SERVICES (MARKHAM), L.L.C.
COPANO NGL SERVICES LLC
COPANO PIPELINES GROUP, L.L.C.
[Signature Page to Cross Guarantee]
Exhibit 10.1
COPANO PIPELINES/NORTH TEXAS, L.L.C.
COPANO PIPELINES/ROCKY MOUNTAINS, LLC
COPANO PIPELINES/SOUTH TEXAS LLC
COPANO PIPELINES/UPPER GULF COAST LLC
COPANO PROCESSING LLC
COPANO RISK MANAGEMENT LLC
COPANO/WEBB-DUVAL PIPELINE LLC
CPNO SERVICES LLC
DAKOTA BULK TERMINAL, INC.
DELTA TERMINAL SERVICES LLC
EAGLE FORD GATHERING LLC
EL PASO CHEYENNE HOLDINGS, L.L.C.
EL PASO CITRUS HOLDINGS, INC.
EL PASO CNG COMPANY, L.L.C.
EL PASO ENERGY SERVICE COMPANY, L.L.C.
EL PASO LLC
EL PASO MIDSTREAM GROUP LLC
EL PASO NATURAL GAS COMPANY, L.L.C.
EL PASO NORIC INVESTMENTS III, L.L.C.
EL PASO PIPELINE CORPORATION
EL PASO PIPELINE GP COMPANY, L.L.C.
EL PASO PIPELINE HOLDING COMPANY, L.L.C.
EL PASO PIPELINE LP HOLDINGS, L.L.C.
EL PASO PIPELINE PARTNERS, L.P.
By El Paso Pipeline GP Company, L.L.C., its general partner
EL PASO PIPELINE PARTNERS OPERATING COMPANY, L.L.C.
EL PASO RUBY HOLDING COMPANY, L.L.C.
EL PASO TENNESSEE PIPELINE CO., L.L.C.
ELBA EXPRESS COMPANY, L.L.C.
ELIZABETH RIVER TERMINALS LLC
EMORY B CRANE, LLC
EPBGP CONTRACTING SERVICES LLC
EP ENERGY HOLDING COMPANY
EP RUBY LLC
EPTP ISSUING CORPORATION
FERNANDINA MARINE CONSTRUCTION MANAGEMENT LLC
FRANK L. CRANE, LLC
GENERAL STEVEDORES GP, LLC
GENERAL STEVEDORES HOLDINGS LLC
GLOBAL AMERICAN TERMINALS LLC
HAMPSHIRE LLC
HARRAH MIDSTREAM LLC
HBM ENVIRONMENTAL, INC.
ICPT, L.L.C
J.R. NICHOLLS LLC
JAVELINA TUG LLC
JEANNIE BREWER LLC
JV TANKER CHARTERER LLC
KINDER MORGAN (DELAWARE), INC.
KINDER MORGAN 2-MILE LLC
KINDER MORGAN ADMINISTRATIVE SERVICES TAMPA LLC
KINDER MORGAN ALTAMONT LLC
[Signature Page to Cross Guarantee]
Exhibit 10.1
KINDER MORGAN AMORY LLC
KINDER MORGAN ARROW TERMINALS HOLDINGS, INC.
KINDER MORGAN ARROW TERMINALS, L.P.
By Kinder Morgan River Terminals, LLC, its general partner
KINDER MORGAN BALTIMORE TRANSLOAD TERMINAL LLC
KINDER MORGAN BATTLEGROUND OIL LLC
KINDER MORGAN BORDER PIPELINE LLC
KINDER MORGAN BULK TERMINALS, INC.
KINDER MORGAN CARBON DIOXIDE TRANSPORTATION
COMPANY
KINDER MORGAN CO2 COMPANY, L.P.
By Kinder Morgan G.P., Inc., its general partner
KINDER MORGAN COCHIN LLC
KINDER MORGAN COLUMBUS LLC
KINDER MORGAN COMMERCIAL SERVICES LLC
KINDER MORGAN CRUDE & CONDENSATE LLC
KINDER MORGAN CRUDE OIL PIPELINES LLC
KINDER MORGAN CRUDE TO RAIL LLC
KINDER MORGAN CUSHING LLC
KINDER MORGAN DALLAS FORT WORTH RAIL TERMINAL LLC
KINDER MORGAN ENDEAVOR LLC
KINDER MORGAN ENERGY PARTNERS, L.P.
By Kinder Morgan G.P., Inc., its general partner
KINDER MORGAN EP MIDSTREAM LLC
KINDER MORGAN FINANCE COMPANY LLC
KINDER MORGAN FLEETING LLC
KINDER MORGAN FREEDOM PIPELINE LLC
KINDER MORGAN KEYSTONE GAS STORAGE LLC
KINDER MORGAN KMAP LLC
KINDER MORGAN LAS VEGAS LLC
KINDER MORGAN LINDEN TRANSLOAD TERMINAL LLC
KINDER MORGAN LIQUIDS TERMINALS LLC
KINDER MORGAN LIQUIDS TERMINALS ST. GABRIEL LLC
KINDER MORGAN MARINE SERVICES LLC
KINDER MORGAN MATERIALS SERVICES, LLC
KINDER MORGAN MID ATLANTIC MARINE SERVICES LLC
KINDER MORGAN NATGAS O&M LLC
KINDER MORGAN NORTH TEXAS PIPELINE LLC
KINDER MORGAN OPERATING L.P. “A”
By Kinder Morgan G.P., Inc., its general partner
KINDER MORGAN OPERATING L.P. “B”
By Kinder Morgan G.P., Inc., its general partner
KINDER MORGAN OPERATING L.P. “C”
By Kinder Morgan G.P., Inc., its general partner
KINDER MORGAN OPERATING L.P. “D”
By Kinder Morgan G.P., Inc., its general partner
KINDER MORGAN PECOS LLC
KINDER MORGAN PECOS VALLEY LLC
KINDER MORGAN PETCOKE GP LLC
[Signature Page to Cross Guarantee]
Exhibit 10.1
KINDER MORGAN PETCOKE, L.P.
By Kinder Morgan Petcoke GP LLC, its general partner
KINDER MORGAN PETCOKE LP LLC
KINDER MORGAN PETROLEUM TANKERS LLC
KINDER MORGAN PIPELINE LLC
KINDER MORGAN PIPELINES (USA) INC.
KINDER MORGAN PORT MANATEE TERMINAL LLC
KINDER MORGAN PORT SUTTON TERMINAL LLC
KINDER MORGAN PORT TERMINALS USA LLC
KINDER MORGAN PRODUCTION COMPANY LLC
KINDER MORGAN RAIL SERVICES LLC
KINDER MORGAN RESOURCES II LLC
KINDER MORGAN RESOURCES III LLC
KINDER MORGAN RESOURCES LLC
KINDER MORGAN RIVER TERMINALS LLC
KINDER MORGAN SERVICES LLC
KINDER MORGAN SEVEN OAKS LLC
KINDER MORGAN SOUTHEAST TERMINALS LLC
KINDER MORGAN TANK STORAGE TERMINALS LLC
KINDER MORGAN TEJAS PIPELINE LLC
KINDER MORGAN TERMINALS, INC.
KINDER MORGAN TEXAS PIPELINE LLC
KINDER MORGAN TEXAS TERMINALS, L.P.
By General Stevedores GP, LLC, its general partner
KINDER MORGAN TRANSMIX COMPANY, LLC
KINDER MORGAN TREATING LP
By KM Treating GP LLC, its general partner
KINDER MORGAN URBAN RENEWAL, L.L.C.
KINDER MORGAN UTICA LLC
KINDER MORGAN VIRGINIA LIQUIDS TERMINALS LLC
KINDER MORGAN WINK PIPELINE LLC
KINDERHAWK FIELD SERVICES LLC
KM CRANE LLC
KM DECATUR, INC.
KM EAGLE GATHERING LLC
KM GATHERING LLC
KM KASKASKIA DOCK LLC
KM LIQUIDS TERMINALS LLC
KM NORTH CAHOKIA LAND LLC
KM NORTH CAHOKIA SPECIAL PROJECT LLC
KM NORTH CAHOKIA TERMINAL PROJECT LLC
KM SHIP CHANNEL SERVICES LLC
KM TREATING GP LLC
KM TREATING PRODUCTION LLC
KMBT LLC
KMGP CONTRACTING SERVICES LLC
KMGP SERVICES COMPANY, INC.
KN TELECOMMUNICATIONS, INC.
KNIGHT POWER COMPANY LLC
LOMITA RAIL TERMINAL LLC
MILWAUKEE BULK TERMINALS LLC
MJR OPERATING LLC
MOJAVE PIPELINE COMPANY, L.L.C.
MOJAVE PIPELINE OPERATING COMPANY, L.L.C.
MR. BENNETT LLC
[Signature Page to Cross Guarantee]
Exhibit 10.1
MR. VANCE LLC
NASSAU TERMINALS LLC
NGPL HOLDCO INC.
NS 307 HOLDINGS INC.
PADDY RYAN CRANE, LLC
PALMETTO PRODUCTS PIPE LINE LLC
PI 2 PELICAN STATE LLC
PINNEY DOCK & TRANSPORT LLC
QUEEN CITY TERMINALS LLC
RAHWAY RIVER LAND LLC
RAZORBACK TUG LLC
RCI HOLDINGS, INC.
RIVER TERMINALS PROPERTIES GP LLC
RIVER TERMINAL PROPERTIES, L.P.
By River Terminals Properties GP LLC, its general partner
SCISSORTAIL ENERGY, LLC
SNG PIPELINE SERVICES COMPANY, L.L.C.
SOUTHERN GULF LNG COMPANY, L.L.C.
SOUTHERN LIQUEFACTION COMPANY LLC
SOUTHERN LNG COMPANY, L.L.C.
SOUTHERN NATURAL GAS COMPANY, L.L.C.
SOUTHERN NATURAL ISSUING CORPORATION
SOUTHTEX TREATERS LLC
SOUTHWEST FLORIDA PIPELINE LLC
SRT VESSELS LLC
STEVEDORE HOLDINGS, L.P.
By Kinder Morgan Petcoke GP LLC, its general partner
TAJON HOLDINGS, INC.
TEJAS GAS, LLC
TEJAS NATURAL GAS, LLC
TENNESSEE GAS PIPELINE COMPANY, L.L.C.
TENNESSEE GAS PIPELINE ISSUING CORPORATION
TEXAN TUG LLC
TGP PIPELINE SERVICES COMPANY, L.L.C.
TRANS MOUNTAIN PIPELINE (PUGET SOUND) LLC
TRANSCOLORADO GAS TRANSMISSION COMPANY LLC
TRANSLOAD SERVICES, LLC
UTICA MARCELLUS TEXAS PIPELINE LLC
WESTERN PLANT SERVICES, INC.
WYOMING INTERSTATE COMPANY, L.L.C.
By: /s/ Anthony B. Ashley
Anthony Ashley
Vice President
[Signature Page to Cross Guarantee]
Exhibit 10.1
ANNEX A TO
THE CROSS GUARANTEE AGREEMENT
SUPPLEMENT NO. [ ] dated as of [ ] to the CROSS GUARANTEE AGREEMENT dated as of [ ] (the “Agreement”), among each of the Guarantors listed on the signature pages thereto and each of the other entities that becomes a party thereto pursuant to Section 19 of the Agreement (each such entity individually, a “Guarantor” and, collectively, the “Guarantors”). Unless otherwise defined herein, terms defined in the Agreement and used herein shall have the meanings given to them in the Agreement.
A. The Guarantors consist of Kinder Morgan, Inc., a Delaware corporation (“KMI”), and certain of its direct and indirect Subsidiaries, and the Guarantors have entered into the Agreement in order to provide guarantees of certain of the Guarantors’ senior, unsecured Indebtedness outstanding from time to time.
B. Section 19 of the Agreement provides that additional Subsidiaries may become Guarantors under the Agreement by execution and delivery of an instrument in the form of this Supplement. Each undersigned Subsidiary (each a “New Guarantor”) is executing this Supplement at the request of KMI or in accordance with the requirements of the Agreement to become a Guarantor under the Agreement.
Accordingly, each New Guarantor agrees as follows:
SECTION 1. In accordance with Section 19 of the Agreement, each New Guarantor by its signature below becomes a Guarantor under the Agreement with the same force and effect as if originally named therein as a Guarantor and each New Guarantor hereby (a) agrees to all the terms and provisions of the Agreement applicable to it as a Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a Guarantor in the Agreement shall be deemed to include each New Guarantor. The Agreement is hereby incorporated herein by reference.
SECTION 2. Each New Guarantor represents and warrants to the Guaranteed Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed by one or more of the parties to this Supplement on any number of separate counterparts (including by facsimile or other electronic transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Supplement signed by all the parties shall be lodged with KMI. This Supplement shall become effective as to each New Guarantor when KMI shall have received a counterpart of this Supplement that bears the signature of such New Guarantor.
SECTION 4. Except as expressly supplemented hereby, the Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 6. Any provision of this Supplement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
Exhibit 10.1
unenforceability without invalidating the remaining provisions hereof and in the Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 7. All notices, requests and demands pursuant hereto shall be made in accordance with Section 12 of the Agreement. All communications and notices hereunder to each New Guarantor shall be given to it in care of KMI at the address set forth in Section 12 of the Agreement.
[Signature Pages Follow]
Exhibit 10.1
IN WITNESS WHEREOF, each New Guarantor has duly executed this Supplement to the Agreement as of the day and year first above written.
_________________________________
as Guarantor
By:______________________________
Name:
Title:
Exhibit 10.1
ANNEX B TO
THE CROSS GUARANTEE AGREEMENT
FORM OF NOTATION OF GUARANTEE
Subject to the limitations set forth in the Cross Guarantee Agreement, dated as of [•] (the “Guarantee Agreement”), the undersigned Guarantors hereby certify that this [Indebtedness] constitutes a Guaranteed Obligation, entitled to all the rights as such set forth in the Guarantee Agreement. The Guarantors may be released from their guarantees upon the terms and subject to the conditions provided in the Guarantee Agreement. Capitalized terms used but not defined in this notation of guarantee have the meanings assigned such terms in the Guarantee Agreement, a copy of which will be provided to [a holder of this instrument] upon request to [Issuer].
Schedule I of the Guarantee Agreement is hereby deemed to be automatically updated to include this [Indebtedness] thereon as a Guaranteed Obligation.
[GUARANTORS],
as Guarantor
By: ______________________________
Name:
Title:
Exhibit 10.1
SCHEDULE I
Guaranteed Obligations
Current as of: June 30, 2023
| Issuer | Indebtedness | Maturity | ||||||||||||
| Kinder Morgan, Inc. | 5.625% notes | November 15, 2023 | ||||||||||||
| Kinder Morgan, Inc. | 4.30% notes | June 1, 2025 | ||||||||||||
| Kinder Morgan, Inc. | 1.75% notes | November 15, 2026 | ||||||||||||
| Kinder Morgan, Inc. | 6.70% bonds (Coastal) | February 15, 2027 | ||||||||||||
| Kinder Morgan, Inc. | 2.250% notes | March 16, 2027 | ||||||||||||
| Kinder Morgan, Inc. | 6.67% debentures | November 1, 2027 | ||||||||||||
| Kinder Morgan, Inc. | 7.25% debentures | March 1, 2028 | ||||||||||||
| Kinder Morgan, Inc. | 4.30% notes | March 1, 2028 | ||||||||||||
| Kinder Morgan, Inc. | 6.95% bonds (Coastal) | June 1, 2028 | ||||||||||||
| Kinder Morgan, Inc. | 8.05% bonds | October 15, 2030 | ||||||||||||
| Kinder Morgan, Inc. | 2.00% notes | February 15, 2031 | ||||||||||||
| Kinder Morgan, Inc. | 7.80% bonds | August 1, 2031 | ||||||||||||
| Kinder Morgan, Inc. | 7.75% bonds | January 15, 2032 | ||||||||||||
| Kinder Morgan, Inc. | 4.80% bonds | February 1, 2033 | ||||||||||||
| Kinder Morgan, Inc. | 5.20% bonds | June 1, 2033 | ||||||||||||
| Kinder Morgan, Inc. | 5.30% notes | December 1, 2034 | ||||||||||||
| Kinder Morgan, Inc. | 7.75% bonds (Coastal) | October 15, 2035 | ||||||||||||
| Kinder Morgan, Inc. | 6.40% notes | January 5, 2036 | ||||||||||||
| Kinder Morgan, Inc. | 7.42% bonds (Coastal) | February 15, 2037 | ||||||||||||
| Kinder Morgan, Inc. | 5.55% notes | June 1, 2045 | ||||||||||||
| Kinder Morgan, Inc. | 5.050% notes | February 15, 2046 | ||||||||||||
| Kinder Morgan, Inc. | 5.20% notes | March 1, 2048 | ||||||||||||
| Kinder Morgan, Inc. | 3.25% notes | August 1, 2050 | ||||||||||||
| Kinder Morgan, Inc. | 3.60% notes | February 15, 2051 | ||||||||||||
| Kinder Morgan, Inc. | 5.45% notes | August 1, 2052 | ||||||||||||
| Kinder Morgan, Inc. | 7.45% debentures | March 1, 2098 | ||||||||||||
| Kinder Morgan, Inc. | $100 Million Letter of Credit Facility | November 30, 2023 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 3.50% bonds | September 1, 2023 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 4.15% bonds | February 1, 2024 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 4.25% bonds | September 1, 2024 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 7.40% bonds | March 15, 2031 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 7.75% bonds | March 15, 2032 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 7.30% bonds | August 15, 2033 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 5.80% bonds | March 15, 2035 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 6.50% bonds | February 1, 2037 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 6.95% bonds | January 15, 2038 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 6.50% bonds | September 1, 2039 | ||||||||||||
Exhibit 10.1
| Schedule I | ||||||||||||||
| (Guaranteed Obligations) | ||||||||||||||
| Current as of: June 30, 2023 | ||||||||||||||
| Issuer | Indebtedness | Maturity | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 6.55% bonds | September 15, 2040 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 6.375% bonds | March 1, 2041 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 5.625% bonds | September 1, 2041 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 5.00% bonds | August 15, 2042 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 5.00% bonds | March 1, 2043 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 5.50% bonds | March 1, 2044 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | 5.40% bonds | September 1, 2044 | ||||||||||||
Kinder Morgan Energy Partners, L.P.(1) | 4.30% bonds | May 1, 2024 | ||||||||||||
Kinder Morgan Energy Partners, L.P.(1) | 7.50% bonds | November 15, 2040 | ||||||||||||
Kinder Morgan Energy Partners, L.P.(1) | 4.70% bonds | November 1, 2042 | ||||||||||||
| Tennessee Gas Pipeline Company, L.L.C. | 7.00% bonds | March 15, 2027 | ||||||||||||
| Tennessee Gas Pipeline Company, L.L.C. | 7.00% bonds | October 15, 2028 | ||||||||||||
| Tennessee Gas Pipeline Company, L.L.C. | 2.90% bonds | March 1, 2030 | ||||||||||||
| Tennessee Gas Pipeline Company, L.L.C. | 8.375% bonds | June 15, 2032 | ||||||||||||
| Tennessee Gas Pipeline Company, L.L.C. | 7.625% bonds | April 1, 2037 | ||||||||||||
| El Paso Natural Gas Company, L.L.C. | 7.50% bonds | November 15, 2026 | ||||||||||||
| El Paso Natural Gas Company, L.L.C. | 3.50% bonds | February 15, 2032 | ||||||||||||
| El Paso Natural Gas Company, L.L.C. | 8.375% bonds | June 15, 2032 | ||||||||||||
| Colorado Interstate Gas Company, L.L.C. | 4.15% notes | August 15, 2026 | ||||||||||||
| Colorado Interstate Gas Company, L.L.C. | 6.85% bonds | June 15, 2037 | ||||||||||||
| El Paso Tennessee Pipeline Co. L.L.C. | 7.25% bonds | December 15, 2025 | ||||||||||||
| Other | Cora industrial revenue bonds | April 1, 2024 | ||||||||||||
_________________________________________________ (1) The original issuer, El Paso Pipeline Partners, L.P. merged with and into Kinder Morgan Energy Partners, L.P. effective January 1, 2015. | ||||||||||||||
2
Exhibit 10.1
| Schedule I | ||||||||||||||
| (Guaranteed Obligations) | ||||||||||||||
| Current as of: June 30, 2023 | ||||||||||||||
Hedging Agreements1 | ||||||||||||||
| Issuer | Guaranteed Party | Date | ||||||||||||
| Kinder Morgan, Inc. | Bank of America, N.A. | January 4, 2018 | ||||||||||||
| Kinder Morgan, Inc. | BNP Paribas | September 15, 2016 | ||||||||||||
| Kinder Morgan, Inc. | Citibank, N.A. | March 16, 2017 | ||||||||||||
| Kinder Morgan, Inc. | J. Aron & Company | December 23, 2011 | ||||||||||||
| Kinder Morgan, Inc. | SunTrust Bank | August 29, 2001 | ||||||||||||
| Kinder Morgan, Inc. | Barclays Bank PLC | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | Bank of Montreal | April 25, 2019 | ||||||||||||
| Kinder Morgan, Inc. | Bank of Tokyo-Mitsubishi, Ltd., New York Branch | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | Canadian Imperial Bank of Commerce | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | Commerzbank AG | August 22, 2019 | ||||||||||||
| Kinder Morgan, Inc. | Compass Bank | March 24, 2015 | ||||||||||||
| Kinder Morgan, Inc. | Credit Agricole Corporate and Investment Bank | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | Credit Suisse International | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | Deutsche Bank AG | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | ING Capital Markets LLC | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | Intesa Sanpaolo S.p.A. | July 1, 2019 | ||||||||||||
| Kinder Morgan, Inc. | JPMorgan Chase Bank, N.A. | February 19, 2015 | ||||||||||||
| Kinder Morgan, Inc. | Mizuho Capital Markets Corporation | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | Morgan Stanley Capital Services LLC | July 9, 2018 | ||||||||||||
| Kinder Morgan, Inc. | PNC Bank National Association | February 4, 2019 | ||||||||||||
| Kinder Morgan, Inc. | Royal Bank of Canada | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | SMBC Capital Markets, Inc. | April 26, 2017 | ||||||||||||
| Kinder Morgan, Inc. | The Bank of Nova Scotia | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | The Royal Bank of Scotland PLC | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | Societe Generale | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | The Toronto-Dominion Bank | October 2, 2017 | ||||||||||||
| Kinder Morgan, Inc. | UBS AG | November 26, 2014 | ||||||||||||
| Kinder Morgan, Inc. | U.S. Bank National Association | May 30, 2023 | ||||||||||||
| Kinder Morgan, Inc. | Wells Fargo Bank, N.A. | November 26, 2014 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Bank of America, N.A. | April 14, 1999 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Bank of Tokyo-Mitsubishi, Ltd., New York Branch | November 23, 2004 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Barclays Bank PLC | November 18, 2003 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Canadian Imperial Bank of Commerce | August 4, 2011 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Citibank, N.A. | March 14, 2002 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Credit Agricole Corporate and Investment Bank | June 20, 2014 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Credit Suisse International | May 14, 2010 | ||||||||||||
_________________________________________________ 1 Guaranteed Obligations with respect to Hedging Agreements include International Swaps and Derivatives Association Master Agreements (“ISDAs”) and all transactions entered into pursuant to any ISDA listed on this Schedule I. | ||||||||||||||
3
Exhibit 10.1
| Schedule I | ||||||||||||||
| (Guaranteed Obligations) | ||||||||||||||
| Current as of: June 30, 2023 | ||||||||||||||
Hedging Agreements1 | ||||||||||||||
| Issuer | Guaranteed Party | Date | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | ING Capital Markets LLC | September 21, 2011 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | J. Aron & Company | November 11, 2004 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | JPMorgan Chase Bank | August 29, 2001 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Merrill Lynch Capital Services, Inc. | March 8, 2005 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Mizuho Capital Markets Corporation | July 11, 2014 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Morgan Stanley Capital Services Inc. | March 10, 2010 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Royal Bank of Canada | March 12, 2009 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | The Royal Bank of Scotland PLC | March 20, 2009 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | The Bank of Nova Scotia | August 14, 2003 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Societe Generale | July 18, 2014 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | SunTrust Bank | March 14, 2002 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | UBS AG | February 23, 2011 | ||||||||||||
| Kinder Morgan Energy Partners, L.P. | Wells Fargo Bank, N.A. | July 31, 2007 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Bank of Montreal | April 25, 2019 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Canadian Imperial Bank of Commerce | December 18, 2006 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Citibank, N.A. | February 22, 2005 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Deutsche Bank AG | June 13, 2007 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | ING Capital Markets LLC | April 17, 2014 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Intesa Sanpaolo S.p.a | October 29, 2020 | ||||||||||||
| Kinder Morgan Production LLC | J. Aron & Company | June 12, 2006 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | J. Aron & Company | June 8, 2000 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | JPMorgan Chase Bank, N.A. | September 7, 2006 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Macquarie Bank Limited | September 20, 2010 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Merrill Lynch Commodities, Inc. | October 24, 2001 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Phillips 66 Company | March 30, 2015 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | PNC Bank, National Association | July 11, 2018 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Royal Bank of Canada | October 18, 2018 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | The Bank of Nova Scotia | May 8, 2014 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | The Toronto Dominion Bank | September 14, 2021 | ||||||||||||
| Kinder Morgan Texas Pipeline LLC | Wells Fargo Bank, N.A. | June 1, 2013 | ||||||||||||
| Copano Risk Management, LLC | Citibank, N.A. | July 21, 2008 | ||||||||||||
| Copano Risk Management, LLC | J. Aron & Company | December 12, 2005 | ||||||||||||
| Copano Risk Management, LLC | Morgan Stanley Capital Group Inc. | May 4, 2007 | ||||||||||||
_________________________________________________ 1 Guaranteed Obligations with respect to Hedging Agreements include International Swaps and Derivatives Association Master Agreements (“ISDAs”) and all transactions entered into pursuant to any ISDA listed on this Schedule I. | ||||||||||||||
4
Exhibit 10.1
SCHEDULE II Guarantors Current as of: June 30, 2023 | ||||||||
| American Petroleum Tankers II LLC | Copano Terminals LLC | |||||||
| American Petroleum Tankers III LLC | Copano/Webb-Duval Pipeline LLC | |||||||
| American Petroleum Tankers IV LLC | CPNO Services LLC | |||||||
| American Petroleum Tankers LLC | Dakota Bulk Terminal LLC | |||||||
| American Petroleum Tankers Parent LLC | Delta Terminal Services LLC | |||||||
| American Petroleum Tankers V LLC | Eagle Ford Gathering LLC | |||||||
| American Petroleum Tankers VI LLC | El Paso Cheyenne Holdings, L.L.C. | |||||||
| American Petroleum Tankers VII LLC | El Paso Citrus Holdings, Inc. | |||||||
| American Petroleum Tankers VIII LLC | El Paso CNG Company, L.L.C. | |||||||
| American Petroleum Tankers IX LLC | El Paso Energy Service Company, L.L.C. | |||||||
| American Petroleum Tankers X LLC | El Paso LLC | |||||||
| American Petroleum Tankers XI LLC | El Paso Midstream Group LLC | |||||||
| APT Florida LLC | El Paso Natural Gas Company, L.L.C. | |||||||
| APT Intermediate Holdco LLC | El Paso Noric Investments III, L.L.C. | |||||||
| APT New Intermediate Holdco LLC | El Paso Ruby Holding Company, L.L.C. | |||||||
| APT Pennsylvania LLC | El Paso Tennessee Pipeline Co., L.L.C. | |||||||
| APT Sunshine State LLC | Elba Express Company, L.L.C. | |||||||
Arlington Storage Company, LLC | Elizabeth River Terminals LLC | |||||||
| Betty Lou LLC | Emory B Crane, LLC | |||||||
| Camino Real Gas Gathering Company LLC | EP Ruby LLC | |||||||
| Camino Real Gathering Company, L.L.C. | EPBGP Contracting Services LLC | |||||||
| Cantera Gas Company LLC | EPTP Issuing Corporation | |||||||
| CDE Pipeline LLC | Frank L. Crane, LLC | |||||||
| Central Florida Pipeline LLC | General Stevedores GP, LLC | |||||||
| Cheyenne Plains Gas Pipeline Company, L.L.C. | General Stevedores Holdings LLC | |||||||
| CIG Gas Storage Company LLC | Harrah Midstream LLC | |||||||
| CIG Pipeline Services Company, L.L.C. | HBM Environmental LLC | |||||||
| Colorado Interstate Gas Company, L.L.C. | Hiland Crude, LLC | |||||||
| Colorado Interstate Issuing Corporation | Hiland Partners Holdings LLC | |||||||
| Copano Double Eagle LLC | HPH Oklahoma Gathering LLC | |||||||
| Copano Energy Finance Corporation | ICPT, L.L.C. | |||||||
| Copano Energy Services/Upper Gulf Coast LLC | Independent Trading & Transportation | |||||||
| Copano Energy, L.L.C. | Company I, L.L.C. | |||||||
| Copano Field Services GP, L.L.C. | JV Tanker Charterer LLC | |||||||
| Copano Field Services/North Texas, L.L.C. | Kinder Morgan 2-Mile LLC | |||||||
| Copano Field Services/South Texas LLC | Kinder Morgan Administrative Services Tampa LLC | |||||||
| Copano Field Services/Upper Gulf Coast LLC | Kinder Morgan Altamont LLC | |||||||
| Copano Liberty, LLC | Kinder Morgan Arlington RNG LLC | |||||||
| Copano NGL Services (Markham), L.L.C. | Kinder Morgan Baltimore Transload Terminal LLC | |||||||
| Copano NGL Services LLC | Kinder Morgan Battleground Oil LLC | |||||||
| Copano Pipelines Group, L.L.C. | Kinder Morgan Border Pipeline LLC | |||||||
| Copano Pipelines/North Texas, L.L.C. | Kinder Morgan Bulk Terminals LLC | |||||||
| Copano Pipelines/Rocky Mountains, LLC | Kinder Morgan Carbon Dioxide Transportation | |||||||
| Copano Pipelines/South Texas LLC | Company | |||||||
| Copano Pipelines/Upper Gulf Coast LLC | Kinder Morgan CCS Holdco LLC | |||||||
| Copano Processing LLC | Kinder Morgan CO2 Company LLC | |||||||
| Copano Risk Management LLC | Kinder Morgan Commercial Services LLC | |||||||
Exhibit 10.1
| Schedule II | ||||||||
| (Guarantors) | ||||||||
Current as of: June 30, 2023 | ||||||||
| Kinder Morgan Contracting Services LLC | Kinder Morgan Portland Intermediate Holdings I LLC | |||||||
| Kinder Morgan Crude & Condensate LLC | Kinder Morgan Portland Intermediate Holdings II LLC | |||||||
| Kinder Morgan Crude Marketing LLC | Kinder Morgan Portland Jet Line LLC | |||||||
| Kinder Morgan Crude Oil Pipelines LLC | Kinder Morgan Portland Liquids Terminals LLC | |||||||
| Kinder Morgan Crude to Rail LLC | Kinder Morgan Portland Operating LLC | |||||||
| Kinder Morgan Cushing LLC | Kinder Morgan Production Company LLC | |||||||
| Kinder Morgan Dallas Fort Worth Rail Terminal LLC | Kinder Morgan Products Terminals LLC | |||||||
| Kinder Morgan Deeprock North Holdco LLC | Kinder Morgan Rail Services LLC | |||||||
| Kinder Morgan Endeavor LLC | Kinder Morgan Ranger LLC | |||||||
| Kinder Morgan Energy Partners, L.P. | Kinder Morgan Resources II LLC | |||||||
| Kinder Morgan Energy Transition Ventures Holdco | Kinder Morgan Resources III LLC | |||||||
| LLC | Kinder Morgan RNG Holdco LLC | |||||||
| Kinder Morgan EP Midstream LLC | Kinder Morgan Scurry Connector LLC | |||||||
| Kinder Morgan Finance Company LLC | Kinder Morgan Seven Oaks LLC | |||||||
| Kinder Morgan Freedom Pipeline LLC | Kinder Morgan Shreveport RNG LLC | |||||||
| Kinder Morgan Galena Park West LLC | Kinder Morgan SNG Operator LLC | |||||||
| Kinder Morgan GP LLC | Kinder Morgan Southeast Terminals LLC | |||||||
| Kinder Morgan IMT Holdco LLC | Kinder Morgan Tank Storage Terminals LLC | |||||||
| Kinder Morgan, Inc. | Kinder Morgan Tejas Pipeline LLC | |||||||
| Kinder Morgan Keystone Gas Storage LLC | Kinder Morgan Terminals LLC | |||||||
| Kinder Morgan KMAP LLC | Kinder Morgan Terminals Wilmington LLC | |||||||
| Kinder Morgan Las Vegas LLC | Kinder Morgan Texas Pipeline LLC | |||||||
| Kinder Morgan Linden Transload Terminal LLC | Kinder Morgan Texas Terminals, L.P. | |||||||
| Kinder Morgan Liquids Terminals LLC | Kinder Morgan Transmix Company, LLC | |||||||
| Kinder Morgan Liquids Terminals St. Gabriel LLC | Kinder Morgan Treating LP | |||||||
| Kinder Morgan Louisiana Pipeline Holding LLC | Kinder Morgan Utica LLC | |||||||
| Kinder Morgan Louisiana Pipeline LLC | Kinder Morgan Vehicle Services LLC | |||||||
| Kinder Morgan Marine Services LLC | Kinder Morgan Victoria RNG LLC | |||||||
| Kinder Morgan Materials Services, LLC | Kinder Morgan Virginia Liquids Terminals LLC | |||||||
| Kinder Morgan Mid Atlantic Marine Services LLC | Kinder Morgan Wink Pipeline LLC | |||||||
| Kinder Morgan NatGas O&M LLC | KinderHawk Field Services LLC | |||||||
| Kinder Morgan NGPL Holdings LLC | Kinetrex Energy Transportation, LLC | |||||||
| Kinder Morgan North Texas Pipeline LLC | Kinetrex Holdco, Inc. | |||||||
| Kinder Morgan Operating LLC “A” | KM Crane LLC | |||||||
| Kinder Morgan Operating LLC “B” | KM Decatur LLC | |||||||
| Kinder Morgan Operating LLC “C” | KM Eagle Gathering LLC | |||||||
| Kinder Morgan Operating LLC “D” | KM Gas Marketing LLC | |||||||
| Kinder Morgan Pecos LLC | KM Gathering LLC | |||||||
| Kinder Morgan Pecos Valley LLC | KM Kaskaskia Dock LLC | |||||||
| Kinder Morgan Permian CCS LLC | KM Liquids Marketing LLC | |||||||
| Kinder Morgan Petcoke GP LLC | KM Liquids Terminals LLC | |||||||
| Kinder Morgan Petcoke LP LLC | KM North Cahokia Land LLC | |||||||
| Kinder Morgan Petcoke, L.P. | KM North Cahokia Special Project LLC | |||||||
| Kinder Morgan Petroleum Tankers LLC | KM North Cahokia Terminal Project LLC | |||||||
| Kinder Morgan Pipeline LLC | KM Ship Channel Services LLC | |||||||
| Kinder Morgan Port Manatee Terminal LLC | KM Treating GP LLC | |||||||
| Kinder Morgan Port Sutton Terminal LLC | KM Treating Production LLC | |||||||
| Kinder Morgan Port Terminals USA LLC | KM Utopia Operator LLC | |||||||
| Kinder Morgan Portland Bulk LLC | KMBT Legacy Holdings LLC | |||||||
| Kinder Morgan Portland Holdings LLC | KMBT LLC | |||||||
2
Exhibit 10.1
| Schedule II | ||||||||
| (Guarantors) | ||||||||
Current as of: June 30, 2023 | ||||||||
| KMGP Services Company, Inc. | Western Plant Services LLC | |||||||
| KN Telecommunications, Inc. | Wyoming Interstate Company, L.L.C. | |||||||
| Knight Power Company LLC | ||||||||
| Liberty High BTU LLC | ||||||||
LNG Indy, LLC | ||||||||
| Lomita Rail Terminal LLC | ||||||||
| Milwaukee Bulk Terminals LLC | ||||||||
| MJR Operating LLC | ||||||||
| Mojave Pipeline Company, L.L.C. | ||||||||
| Mojave Pipeline Operating Company, L.L.C. | ||||||||
| North American Bio-Fuels, L.L.C. | ||||||||
| North American-Central, LLC | ||||||||
| North American Natural Resources, LLC | ||||||||
| North American Natural Resources-SBL, LLC | ||||||||
| Paddy Ryan Crane, LLC | ||||||||
| Palmetto Products Pipe Line LLC | ||||||||
| PI 2 Pelican State LLC | ||||||||
| Pinney Dock & Transport LLC | ||||||||
Prairie View High BTU LLC | ||||||||
| Queen City Terminals LLC | ||||||||
| Rahway River Land LLC | ||||||||
| River Terminals Properties GP LLC | ||||||||
| River Terminal Properties, L.P. | ||||||||
RNG Indy LLC | ||||||||
| ScissorTail Energy, LLC | ||||||||
| SNG Pipeline Services Company, L.L.C. | ||||||||
| Southern Dome, LLC | ||||||||
| Southern Gulf LNG Company, L.L.C. | ||||||||
| Southern Liquefaction Company LLC | ||||||||
| Southern LNG Company, L.L.C. | ||||||||
| Southern Oklahoma Gathering LLC | ||||||||
| SouthTex Treaters LLC | ||||||||
| Southwest Florida Pipeline LLC | ||||||||
| SRT Vessels LLC | ||||||||
Stagecoach Energy Solutions LLC | ||||||||
Stagecoach Gas Services LLC | ||||||||
Stagecoach Operating Services LLC | ||||||||
| Stagecoach Pipeline & Storage Company LLC | ||||||||
| Stevedore Holdings, L.P. | ||||||||
| Tejas Gas, LLC | ||||||||
| Tejas Natural Gas, LLC | ||||||||
| Tennessee Gas Pipeline Company, L.L.C. | ||||||||
| Tennessee Gas Pipeline Issuing Corporation | ||||||||
| Texan Tug LLC | ||||||||
| TGP Pipeline Services Company, L.L.C. | ||||||||
| TransColorado Gas Transmission Company LLC | ||||||||
| Transload Services, LLC | ||||||||
Twin Bridges High BTU LLC | ||||||||
| Twin Tier Pipeline LLC | ||||||||
| Utica Marcellus Texas Pipeline LLC | ||||||||
3
Exhibit 10.1
| SCHEDULE III Excluded Subsidiaries | ||||||||
| ANR Real Estate Corporation | ||||||||
| Coastal Eagle Point Oil Company | ||||||||
| Coastal Oil New England, Inc. | ||||||||
| Coscol Petroleum Corporation | ||||||||
| El Paso CGP Company, L.L.C. | ||||||||
| El Paso Energy Capital Trust I | ||||||||
| El Paso Energy E.S.T. Company | ||||||||
| El Paso Energy International Company | ||||||||
| El Paso Merchant Energy North America Company, L.L.C. | ||||||||
| El Paso Merchant Energy-Petroleum Company | ||||||||
| El Paso Reata Energy Company, L.L.C. | ||||||||
| El Paso Remediation Company | ||||||||
| El Paso Services Holding Company | ||||||||
| EPEC Corporation | ||||||||
| EPEC Oil Company Liquidating Trust | ||||||||
| EPEC Polymers, Inc. | ||||||||
| EPED Holding Company | ||||||||
| K N Capital Trust I | ||||||||
| K N Capital Trust III | ||||||||
| Mesquite Investors, L.L.C. | ||||||||
| Note: The Excluded Subsidiaries listed on this Schedule III may also be Excluded Subsidiaries pursuant to other exceptions set forth in the definition of “Excluded Subsidiary”. | ||||||||
Exhibit 22.1
List of Guarantor Subsidiaries
The Cross Guarantee Agreement furnished as Exhibit 10.1 to this Quarterly Report on Form 10-Q sets forth, as of June 30, 2023, the registrant’s guarantor subsidiaries on Schedule II thereto and the guaranteed securities on Schedule I thereto.
Exhibit 31.1
KINDER MORGAN, INC. AND SUBSIDIARIES
CERTIFICATION PURSUANT TO RULE 13A-14(A) OR 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steven J. Kean, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Kinder Morgan, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | July 21, 2023 | /s/ Steven J. Kean | ||||||
| Steven J. Kean | ||||||||
| Chief Executive Officer | ||||||||
Exhibit 31.2
KINDER MORGAN, INC. AND SUBSIDIARIES
CERTIFICATION PURSUANT TO RULE 13A-14(A) OR 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David P. Michels, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Kinder Morgan, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | July 21, 2023 | /s/ David P. Michels | ||||||
| David P. Michels | ||||||||
| Vice President and Chief Financial Officer | ||||||||
Exhibit 32.1
KINDER MORGAN, INC. AND SUBSIDIARIES
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Kinder Morgan, Inc. (the “Company”) for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Kinder Morgan, Inc. and will be retained by Kinder Morgan, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: | July 21, 2023 | /s/ Steven J. Kean | ||||||
| Steven J. Kean | ||||||||
| Chief Executive Officer | ||||||||
Exhibit 32.2
KINDER MORGAN, INC. AND SUBSIDIARIES
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Kinder Morgan, Inc. (the “Company”) for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Kinder Morgan, Inc. and will be retained by Kinder Morgan, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: | July 21, 2023 | /s/ David P. Michels | ||||||
| David P. Michels | ||||||||
| Vice President and Chief Financial Officer | ||||||||