HOUSTON--(BUSINESS WIRE)--
Kinder Morgan Energy Partners, L.P. (NYSE:KMP) today increased its
quarterly cash distribution per common unit to $1.02 ($4.08
annualized) from $0.99 ($3.96 annualized). Payable on Nov. 14, 2008,
to unitholders of record as of Oct. 31, 2008, the distribution
represents a 16 percent increase over the third quarter 2007 cash
distribution per unit of $0.88 ($3.52 annualized). KMP has increased
the distribution 34 times since current management took over in
February of 1997.
KMP reported quarterly distributable cash flow before certain
items of $281.9 million, up 23 percent from $229.8 million for the
third quarter of 2007. Distributable cash flow per unit before certain
items was $1.09, up 14 percent from $0.96 per unit for the comparable
period last year. Net income before certain items was $345 million
compared to $258.9 million for the third quarter of 2007. Including
certain items, net income for the third quarter was $329.8 million
compared to $213.8 million for the same period last year. Included in
the $15.2 million net loss in certain items for the third quarter were
one-time incremental expenses and asset write-offs associated with the
impact of Hurricanes Gustav and Ike, and three fires at company
terminals. Lost business in the third quarter totaling approximately
$21.5 million due to the hurricanes and fires was not included in
certain items, but the impact is discussed in the segment results
below.
Through nine months of 2008, KMP produced distributable cash flow
before certain items of $856 million, up 37 percent from $622.9
million for the same period last year. The excess of distributable
cash flow before certain items above the distribution for the first
three quarters was approximately $97 million. Net income through nine
months before certain items was $1.06 billion compared to $728.8
million for the same period last year. Including certain items, net
income through three quarters was $1.04 billion versus $297 million
for the same period last year.
Chairman and CEO Richard D. Kinder said, "KMP had a very strong
third quarter despite lost business associated with two hurricanes,
decreased demand for gasoline, a dreadful economy, and increases in
construction and fuel costs that impacted both our capital expansion
program and our existing operations. Perhaps more than any quarter
since this management team took over in 1997, our results demonstrate
that KMP's diversified portfolio of stable assets is capable of
generating consistently strong cash flow even in extremely difficult
market conditions. Total segment earnings before DD&A and certain
items were $693.1 million, up 22 percent from $566.7 million in the
third quarter of 2007. Our robust results were led by the CO2, Natural
Gas Pipelines and Terminals business segments."
Overview of Business Segments
The Products Pipelines business produced third quarter segment
earnings before DD&A and certain items of $140.6 million, down 9
percent from $155.2 million for the same period last year. The
decrease in performance compared to the same quarter last year was
attributable to the sale of the North System, which closed in the
fourth quarter of 2007, and lower volumes due to decreased demand and
lost business associated with two hurricanes. Excluding the North
System, this segment's earnings before DD&A and certain items were
only down about 3 percent compared to the third quarter last year.
This segment is not expected to meet its published annual budget of 5
percent growth.
The lost business due to Hurricanes Gustav and Ike at the Products
Pipelines segment for the quarter was approximately $930,000.
Plantation Pipe Line Company sustained no damage from Hurricanes
Gustav or Ike and had 100 percent capacity available throughout
Hurricane Ike. The pipeline system was pumping reduced volumes,
however, due to the shutdown of refineries and extended delays in
restarting refineries in the Gulf Coast. Delivery volumes on
Plantation returned to pre-hurricane levels earlier this month.
"Through three quarters this segment's refined products revenues
are still above last year, but volumes continue to be significantly
impacted by reduced demand, particularly for gasoline," Kinder
explained. "Highlights for the quarter included improved results by
Southeast Terminals, West Coast Terminals and the Central Florida
Pipeline compared to the third quarter of 2007. These assets benefited
as we upgraded and modified our facilities which enabled us to
generate additional revenues by handling more ethanol."
Total refined products revenues for the quarter were flat and
volumes were down 7.9 percent compared to the same period a year ago
(excluding Plantation, volumes were down 7.3 percent). Gasoline
volumes were down 9 percent compared to the third quarter of 2007.
Diesel volumes were down 5 percent and commercial jet fuel volumes
were down 6 percent. Through nine months of 2008, total refined
products revenues were up 1.8 percent and volumes were down 7.2
percent (excluding Plantation, volumes were down 5.8 percent).
The Natural Gas Pipelines business produced third quarter segment
earnings before DD&A and certain items of $177.2 million, up 25
percent from $142 million for the third quarter of 2007, and on track
to exceed its published annual budget of 18 percent growth. "Our
Natural Gas Pipelines business produced excellent results led by
contributions from Rockies Express West, which began service in
January this year and reached full operations in May," Kinder said.
"The Texas Intrastate Pipeline Group had another superb quarter,
overcoming lost business associated with Hurricane Ike, and
TransColorado produced higher results than in the comparable period
last year, reflecting a completed expansion."
Growth by the Texas intrastates in the quarter was attributable to
higher sales margins, increased transportation revenue from long-term
contracts, and greater processing volumes and margins. The lost
business at the intrastates for the quarter due to the hurricanes was
$3.6 million, as transportation volumes decreased by about 9 percent
compared to the third quarter of 2007.
Overall segment transport volumes were up 27 percent from the
comparable period last year due to REX-West being operational. Sales
volumes were down 2 percent.
The CO2 business delivered third quarter segment earnings before
DD&A of $203.3 million, up 47 percent from $138 million for the same
period last year, and on track to exceed its published annual budget
of 40 percent growth. The lost business in the third quarter due to
Hurricane Ike at this segment was approximately $10.7 million,
primarily attributable to a 24 percent decrease in NGL sales volumes
due to third-party fractionation facilities being shut down.
"CO2 had an outstanding quarter driven by stronger than expected
oil production at the SACROC Unit, increased CO2 sales and transport
volumes, higher hedge prices and higher oil and CO2 prices," Kinder
said.
For the quarter, average oil production at SACROC was 27.9
thousand barrels per day (MBbl/d), up 2 percent from the same period
last year. Average oil production at the Yates Field was 27.1 MBbl/d,
flat with the third quarter of 2007. CO2 delivery volumes were up
14 percent compared to the third quarter last year due to expansion
projects in southwest Colorado that have increased CO2 production.
The CO2 segment is an area where KMP is exposed to commodity price
risk, but that risk is mitigated by a long-term hedging strategy
intended to generate more stable realized prices. The realized
weighted average oil price per barrel, with all hedges allocated to
oil, was $51.45 for the quarter. The realized weighted average NGL
price per barrel, allocating none of the hedges to NGLs, was $77.97
for the quarter.
The Terminals business reported third quarter segment earnings
before DD&A and certain items of $132.4 million, up 21 percent from
$109.4 million for the third quarter of 2007, and is expected to come
in slightly below its published annual budget of 24 percent growth.
"Our terminals business had a good quarter, with about 75 percent of
its growth coming from organic opportunities and the remainder
attributable to acquisitions," Kinder said. "Expansions resulted in
internal growth at our large liquids terminals on the Houston Ship
Channel, terminals in New York Harbor and in Canada at the North 40
Terminal near Edmonton and at Vancouver Wharves." Marine Terminals
(acquired in September 2007) was the primary acquisition contributing
positively to segment earnings before DD&A for the quarter.
The lost business in the third quarter at this segment from both
hurricanes and a fire at the Pasadena Terminal on the Houston Ship
Channel was approximately $6.3 million. The vast majority of the lost
business related to the company's petcoke operations, a portion of
which was sidelined because of refinery shutdowns.
Total bulk tonnage was up 9 percent for the quarter compared to
the third quarter of 2007, led by strong coal volumes at the Pier IX,
Cora and Grand Rivers terminals in Virginia, Illinois and Kentucky,
respectively. Coal volumes were up 1.8 million tons compared to the
third quarter of 2007.
Kinder Morgan Canada (formerly referred to as the Trans Mountain
segment) produced third quarter segment earnings before DD&A of $39.6
million, up 79 percent from $22.1 million for the same period last
year. These results primarily reflect the completion of the first
portion of the Anchor Loop expansion of the Trans Mountain Pipeline,
which boosted capacity from 260,000 to 285,000 barrels per day and
resulted in a higher tariff. In August, KMP acquired the
Express-Platte pipeline system and a jet fuel pipeline from Knight
Inc., and subsequently changed the name of this segment. The
Express-Platte system and the jet fuel pipeline had only a slight
impact on the segment for the quarter as they were owned for only a
portion of the period.
Outlook
KMP previously announced that it expects to declare cash
distributions of $4.02 per unit for 2008, and the company expects to
meet or exceed that target. This projection includes contributions
from assets currently owned by KMP and does not include any benefits
from unidentified acquisitions. Kinder Morgan Management, LLC
(NYSE:KMR) also expects to declare distributions of $4.02 per share or
more for 2008.
"Looking ahead, KMP is well positioned for future growth," Kinder
said. "We continue to make progress on many large infrastructure
projects that will drive growth in 2009 and beyond."
Projects
Kinder noted that costs continue to escalate on some of the
company's major projects due to rising construction and material
costs, additional regulatory requirements and weather delays. "We are
extremely focused on managing these increases and identifying
ancillary opportunities to offset them where possible. Our total
forecasted capital expenditures on our major projects have increased
by 22 percent from the projection we made at our January investor
conference. Most of the increase in the last quarter has been on our
major natural gas pipeline projects. While we would rather not see
these increases, we remain confident that large projects like Rockies
Express and Midcontinent Express will still deliver attractive returns
to our investors. When we evaluate projects in order to make capital
investment decisions, we conservatively estimate cash flows, which
leads to opportunities to outperform. On REX, for example, we are
already providing ancillary services to shippers which generate
revenues in excess of the contractual revenues on which we based our
expected return."
Below is a status update on some new projects and some of the
original approximately $8 billion in capital projects that KMP has
approved and is in various stages of constructing.
Products Pipelines
-- KMP successfully completed a series of tests to demonstrate
the commercial feasibility of transporting batched denatured
ethanol in its 16-inch gasoline pipeline between Tampa and
Orlando, Fla. The company is finalizing mechanical
modifications to the pipeline and intends to offer this
transportation service to its customers by mid-November. The
company has also completed modifications to tanks, truck racks
and related infrastructure for new or expanded ethanol service
at various terminals in the Southeast and Pacific Northwest.
The company has invested approximately $60 million in these
ethanol related projects.
-- A $25 million project to construct 300,000 barrels of new
tanks and ancillary facilities to provide service to the
Marine Corps Naval Air Station in Miramar, Calif., is nearing
completion and will be in service in November, several months
ahead of schedule.
-- KMP has entered into a purchase and sales agreement this month
to purchase a liquids terminal in Phoenix, Ariz., from
ConocoPhillips for approximately $29 million including
upgrades. The facility has tank capacity of approximately
200,000 barrels for gasoline, diesel and ethanol. The terminal
is located near the company's existing terminal in Phoenix and
will increase the company's storage capacity in this market by
almost 13 percent. The transaction is expected to be
immediately accretive to cash available for distribution to
KMP unitholders upon closing, which is expected in December
2008.
Natural Gas Pipelines
-- Construction continues on REX-East and expected in service
dates have been pushed back due to delays in securing permits
and regulatory approvals and inclement weather. Subject to
receipt of regulatory approvals, initial service on the
pipeline is projected to commence April 1, 2009, with capacity
of 1.6 billion cubic feet (Bcf) per day. Service to Lebanon,
Ohio, is expected to commence June 15, 2009, and in service of
the fully powered REX-East pipeline to Clarington, Ohio, is
expected Nov. 1, 2009. REX-East is a 639-mile pipeline segment
that will extend REX eastward from Audrain County, Mo., to
Clarington. The section to Audrain County was placed into
service earlier this year. One of the largest natural gas
pipelines to be constructed in North America, REX is a joint
venture of KMP, Sempra Pipelines and Storage and
ConocoPhillips. When completed, the 1,679-mile pipeline will
have a capacity of approximately 1.8 Bcf per day. Binding firm
commitments from creditworthy shippers have been secured for
all of the capacity on the pipeline. The current estimate of
total construction costs on the entire REX project is
approximately $6 billion.
-- Mobilization for construction began in early September on the
Midcontinent Express Pipeline (MEP). Including a fully
subscribed expansion that was recently added to the project
which will increase available pipeline capacity and cash flow,
the MEP budget is now $1.9 billion. Subject to receipt of
regulatory approvals, interim service on the first portion of
the pipeline is expected to be available by the second quarter
of 2009. The pipeline will extend from southeast Oklahoma,
across northeast Texas, northern Louisiana and central
Mississippi to an interconnection with the Transco Pipeline
near Butler, Ala. In July, a successful binding open season
was completed that increases the main segment of MEP's Zone 1
capacity from 1.5 to 1.8 Bcf per day. The pipeline capacity is
fully subscribed with long-term binding commitments from
creditworthy shippers. The project is a 50/50 joint venture of
KMP and Energy Transfer Partners.
-- KMP announced a new $1.3 billion natural gas pipeline project
with Energy Transfer Partners on Oct. 1. The Fayetteville
Express Pipeline (FEP) is a 42-inch, 187-mile pipeline that
will begin in Conway County, Ark., and end in Quitman County,
Miss. FEP has secured 10-year binding commitments totaling
1.85 Bcf per day of capacity. The pipeline will have an
initial capacity of 2.0 Bcf per day. Pending regulatory
approvals, it is expected to be in service by late 2010 or
early 2011.
-- Construction continues on the Kinder Morgan Louisiana
Pipeline, a 133-mile, 42-inch diameter line, that will
transport natural gas to multiple pipelines from the Cheniere
Sabine Pass liquefied natural gas terminal in Louisiana. The
project is now expected to cost approximately $1 billion. All
of the 3.2 Bcf per day of capacity on the pipeline has been
subscribed by Chevron and Total. The pipeline is anticipated
to be fully operational during the second quarter of 2009.
-- An approximately $74 million natural gas pipeline was
completed in September and is moving additional supplies of
East Texas production to markets in the Houston and Beaumont
areas. The new pipeline, which consists of 63 miles of 24-inch
pipe, is supported by a long-term binding agreement with
CenterPoint Energy Services to provide firm transportation for
a significant portion of the initial project capacity, which
is 225 million cubic feet (MMcf) per day.
CO2
-- The southwest Colorado CO2 expansion is nearing completion.
The Doe Canyon source field began operations in January and is
currently delivering 113 MMcf per day. The Goodman Point
expansion at the McElmo Dome source field is complete and the
final wells needed to fill the plant will be completed in
mid-October. The final phase of expansion is activating the
Blanco pump station on the Cortez pipeline, which is expected
to occur in early November. The entire expansion will cost
approximately $290 million and will increase supplies by
approximately 300 MMcf per day to our customers.
Terminals
-- KMP acquired a liquids terminal in August in Wilmington, N.C.,
for approximately $13 million including planned upgrades. The
facility stores petroleum products and chemicals. The terminal
includes significant transportation infrastructure, liquid and
heated storage, along with custom tank blending capabilities
for agricultural and chemical products. The company also
purchased packaging terminals with locations in Stockton and
San Diego, Calif., in October for approximately $6 million
including planned upgrades. The terminals include state of the
art packaging machinery, conveyors and mobile equipment
capable of handling fertilizer and other bulk materials.
-- An approximately $13 million expansion is underway at the
company's Cora coal terminal in Rockwood, Ill., along the
upper Mississippi River. The project will increase storage
capacity by approximately 250,000 tons to 1.25 million tons
and expand maximum throughput at the terminal to 13 million
tons annually. The project is expected to be completed in the
second quarter of 2009. Also in the third quarter the company
completed construction of a $20.2 million ship dock and two
new storage tanks at Galena Park on the Houston Ship Channel,
as well as four additional storage tanks at Shipyard River in
Charleston, S.C.
Kinder Morgan Canada
-- The approximately C$528 million Anchor Loop project has been
completed ahead of schedule. The Mount Robson portion will
begin service this month, increasing capacity on the Trans
Mountain pipeline system to 300,000 barrels per day (bpd). The
Jasper portion, which began service in April, had increased
capacity from 260,000 bpd to 285,000 bpd. The Trans Mountain
pipeline system transports crude oil and refined products from
Edmonton, Alberta, to marketing terminals and refineries in
British Columbia and Washington state.
-- KMP acquired two pipeline systems from Knight Inc., the
private entity which owns the general partner of KMP. The
purchase includes Knight's one-third interest in the
Express-Platte crude oil pipeline systems that run from
Alberta to Illinois and a jet fuel pipeline that serves the
Vancouver, British Columbia, airport. KMP paid Knight
approximately 2 million KMP units (approximately $116 million)
for the assets.
"Given the volatility in the capital markets, it is worth
discussing how we expect to finance our expansion projects," stated
Kinder. "The most important factor is the strength of our existing
assets and our expansion projects. Our diverse set of energy
infrastructure assets will generate approximately $2 billion of cash
that can be distributed to our partners in 2008. This $2 billion is
after all operating expenses, debt service and sustaining capital
expenditures. Our expansion projects in aggregate will generate
attractive returns on our investment, using conservative projections
secured by contracted customer commitments, even after cost overruns.
We have ample access to short-term funds through unused capacity at
our credit facilities at KMP, REX, MEP and other assets. Our common
units, KMR shares and debt have performed relatively well during these
tumultuous times, which has allowed us to raise $3.4 billion of
long-term debt and $843 million of equity over the last 15 months. If
you include KMR distributions, which essentially constitute an
automatic distribution re-investment program, we have raised
approximately $1.2 billion of equity over the last 15 months. This
gives us confidence that we will continue to be able to access these
markets to raise new capital. In addition, Knight Inc., the general
partner of KMP, has substantial financial resources and the board of
directors of Knight indicated today its willingness to contribute up
to $750 million of equity to KMP over the next 18 months if necessary
to support KMP's capital raising efforts."
Kinder Morgan Management, LLC
Shareholders of Kinder Morgan Management, LLC will also receive a
$1.02 distribution ($4.08 annualized) payable on Nov. 14, 2008, to
shareholders of record as of Oct. 31, 2008. The distribution to KMR
shareholders will be paid in the form of additional KMR shares. The
distribution is calculated by dividing the cash distribution to KMP
unitholders by KMR's average closing price for the 10 trading days
prior to KMR's ex-dividend date.
Kinder Morgan Energy Partners, L.P. (NYSE:KMP) is a leading
pipeline transportation and energy storage company in North America.
KMP owns an interest in or operates more than 25,000 miles of
pipelines and 165 terminals. Its pipelines transport natural gas,
gasoline, crude oil, CO2 and other products, and its terminals store
petroleum products and chemicals and handle bulk materials like coal
and petroleum coke. KMP is also the leading provider of CO2 for
enhanced oil recovery projects in North America. One of the largest
publicly traded pipeline limited partnerships in America, KMP has an
enterprise value of over $20 billion. The general partner of KMP is
owned by Knight Inc. (formerly Kinder Morgan, Inc.), a private
company.
Please join KMP at 4:30 p.m. Eastern Time on Wednesday, Oct. 15,
at www.kindermorgan.com for a LIVE webcast conference call on the
company's third quarter earnings.
The non-generally accepted accounting principles, or non-GAAP,
financial measures of distributable cash flow before certain items,
both in the aggregate and per unit, and segment earnings before
depreciation, depletion, amortization and amortization of excess cost
of equity investments, or DD&A, and certain items, are presented in
this news release. Our non-GAAP financial measures should not be
considered as alternatives to GAAP measures such as net income or any
other GAAP measure of liquidity or financial performance.
Distributable cash flow before certain items is a significant
metric used by us and by external users of our financial statements,
such as investors, research analysts, commercial banks and others, to
compare basic cash flows generated by us to the cash distributions we
expect to pay our unitholders on an ongoing basis. Management uses
this metric to evaluate our overall performance. It also allows
management to simply calculate the coverage ratio of estimated ongoing
cash flows to expected cash distributions. Distributable cash flow
before certain items is also an important non-GAAP financial measure
for our unitholders because it serves as an indicator of our success
in providing a cash return on investment. This financial measure
indicates to investors whether or not we typically are generating cash
flow at a level that can sustain or support an increase in the
quarterly distributions we are paying pursuant to our partnership
agreement. Our partnership agreement requires us to distribute all
available cash. Distributable cash flow before certain items and
similar measures used by other publicly traded partnerships are also
quantitative measures used in the investment community because the
value of a unit of such an entity is generally determined by the
unit's yield (which in turn is based on the amount of cash
distributions the entity pays to a unitholder). The economic substance
behind our use of distributable cash flow before certain items is to
measure and estimate the ability of our assets to generate cash flows
sufficient to make distributions to our investors.
We define distributable cash flow before certain items to be
limited partners' pretax income before certain items and DD&A, less
cash taxes paid and sustaining capital expenditures for KMP, plus DD&A
less sustaining capital expenditures for Rockies Express, our equity
method investee. Distributable cash flow before certain items per unit
is distributable cash flow before certain items divided by average
outstanding units. "Certain items" are items that are required by GAAP
to be reflected in net income, but typically either (1) do not have a
cash impact, for example, goodwill impairments, allocated compensation
for which we will never be responsible, and results from assets prior
to our ownership that are required to be reflected in our results due
to accounting rules regarding entities under common control, or (2) by
their nature are separately identifiable from our normal business
operations and in our view are likely to occur only sporadically, for
example legal settlements, hurricane impacts and casualty losses.
Management uses this measure and believes it is important to users of
our financial statements because it believes the measure more
effectively reflects our business' ongoing cash generation capacity
than a similar measure with the certain items included. For similar
reasons, management uses segment earnings before DD&A and certain
items in its analysis of segment performance and managing our
business. We believe segment earnings before DD&A and certain items is
a significant performance metric because it enables us and external
users of our financial statements to better understand the ability of
our segments to generate cash on an ongoing basis. We believe it is
useful to investors because it is a measure that management believes
is important and that our chief operating decision makers use for
purposes of making decisions about allocating resources to our
segments and assessing the segments' respective performance.
We believe the GAAP measure most directly comparable to
distributable cash flow before certain items is net income. Our
calculation of distributable cash flow before certain items, which
begins with net income after subtracting certain items that are
specifically identified in the accompanying tables, is set forth in
those tables. Net income before certain items is presented primarily
because we use it in this calculation. Segment earnings before DD&A is
the GAAP measure most directly comparable to segment earnings before
DD&A and certain items. Segment earnings before DD&A and certain items
is calculated by removing the certain items attributable to a segment,
which are specifically identified in the footnotes to the accompanying
tables, from segment earnings before DD&A. In addition, segment
earnings before DD&A computed in accordance with GAAP is included on
the first page of the tables presenting our financial results.
Our non-GAAP measures described above should not be considered as
an alternative to GAAP net income, segment earnings before DD&A or any
other GAAP measure. Distributable cash flow before certain items and
segment earnings before DD&A and certain items are not financial
measures in accordance with GAAP and have important limitations as
analytical tools. You should not consider either of these non-GAAP
measures in isolation or as a substitute for an analysis of our
results as reported under GAAP. Because distributable cash flow before
certain items excludes some but not all items that affect net income
and because distributable cash flow measures are defined differently
by different companies in our industry, our distributable cash flow
before certain items may not be comparable to distributable cash flow
measures of other companies. Segment earnings before DD&A and certain
items has similar limitations. Management compensates for the
limitations of these non-GAAP measures by reviewing our comparable
GAAP measures, understanding the differences between the measures and
taking this information into account in its analysis and its decision
making processes.
This news release includes forward-looking statements. Although
Kinder Morgan believes that its expectations are based on reasonable
assumptions, it can give no assurance that such assumptions will
materialize. Important factors that could cause actual results to
differ materially from those in the forward-looking statements herein
are enumerated in Kinder Morgan's Forms 10-K and 10-Q as filed with
the Securities and Exchange Commission.
Kinder Morgan Energy Partners, L.P. and Subsidiaries
Preliminary Consolidated Statement of Income
(Unaudited)
(in millions except per unit amounts)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenues $3,232.8 $2,230.8 $9,448.8 $6,768.9
--------- --------- --------- ---------
Costs, expenses and other
Operating expenses 2,532.9 1,682.0 7,353.8 5,116.7
Depreciation, depletion and
amortization 166.8 138.0 490.5 401.8
General and administrative 73.1 63.0 222.7 222.7
Taxes, other than income
taxes 48.0 38.9 147.0 112.0
Other expense (income) 4.1 (2.5) 1.3 365.2
--------- --------- --------- ---------
2,824.9 1,919.4 8,215.3 6,218.4
--------- --------- --------- ---------
Operating income 407.9 311.4 1,233.5 550.5
Other income (expense)
Earnings from equity
investments 34.6 15.8 118.5 51.4
Amortization of excess cost
of equity investments (1.4) (1.4) (4.3) (4.3)
Interest, net (98.3) (102.4) (293.8) (290.3)
Other, net 4.3 5.0 30.5 9.4
Minority interest (3.1) (2.4) (11.2) (4.4)
--------- --------- --------- ---------
Income from continuing
operations before income
taxes 344.0 226.0 1,073.2 312.3
Income taxes (14.2) (20.8) (35.8) (36.4)
--------- --------- --------- ---------
Income from continuing
operations 329.8 205.2 1,037.4 275.9
Income from discontinued
operations - 8.6 1.3 21.1
--------- --------- --------- ---------
Net income $ 329.8 $ 213.8 $1,038.7 $ 297.0
========= ========= ========= =========
Calculation of Limited
Partners' interest in net
income (loss)
------------------------------
Income from continuing
operations $ 329.8 $ 205.2 $1,037.4 $ 275.9
Less: General Partner's
interest (205.6) (155.7) (588.9) (439.9)
--------- --------- --------- ---------
Limited Partners' interest 124.2 49.5 448.5 (164.0)
Add: Limited Partners'
interest in discontinued
operations - 8.5 1.3 20.9
--------- --------- --------- ---------
Limited Partners' interest
in net income (loss) $ 124.2 $ 58.0 $ 449.8 $ (143.1)
========= ========= ========= =========
Diluted Limited Partners' net
income (loss) per unit
------------------------------
Income (loss) from
continuing operations $ 0.48 $ 0.21 $ 1.76 $ (0.70)
========= ========= ========= =========
Income from discontinued
operations $ - $ 0.03 $ - $ 0.09
========= ========= ========= =========
Net income (loss) $ 0.48 $ 0.24 $ 1.76 $ (0.61)
========= ========= ========= =========
Weighted average units
outstanding 258.8 239.0 255.5 235.1
========= ========= ========= =========
Declared distribution /
unit $ 1.02 $ 0.88 $ 2.97 $ 2.56
========= ========= ========= =========
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Segment earnings before DD&A
and amortization of excess
investments
Products Pipelines $ 130.4 $ 137.9 $ 408.7 $ 428.7
Natural Gas Pipelines 185.0 142.0 555.7 421.3
CO2 203.3 138.0 619.7 392.3
Terminals 120.1 84.4 386.3 295.0
Kinder Morgan Canada 39.6 22.1 103.2 (306.5)
--------- --------- --------- ---------
$ 678.4 $ 524.4 $2,073.6 $1,230.8
========= ========= ========= =========
Kinder Morgan Energy Partners, L.P. and Subsidiaries
Preliminary Earnings Contribution by Business Segment
(Unaudited)
(in millions except per unit amounts)
Three Months EndedNine Months Ended
Sept. 30, Sept. 30,
-------------------------------------
2008 2007 2008 2007
-------- -------- --------- ---------
Segment earnings before DD&A and
amortization of excess
investments (1)
Products Pipelines (9) $ 140.6 $ 155.2 $ 418.3 $ 447.4
Natural Gas Pipelines (9) 177.2 142.0 548.0 422.3
CO2 203.3 138.0 619.7 392.3
Terminals (9) 132.4 109.4 398.6 318.2
Kinder Morgan Canada (2) (9) 39.6 22.1 103.2 42.7
-------- -------- --------- ---------
Total $ 693.1 $ 566.7 $2,087.8 $1,622.9
======== ======== ========= =========
Segment DD&A and amortization of
excess investments
Products Pipelines $ 23.0 $ 23.9 $ 69.2 $ 70.3
Natural Gas Pipelines 17.5 16.3 51.2 48.8
CO2 89.2 73.6 260.9 214.7
Terminals 31.0 22.2 90.9 63.9
Kinder Morgan Canada (1) (2)
(9) 7.5 5.7 22.6 9.1
-------- -------- --------- ---------
Total $ 168.2 $ 141.7 $ 494.8 $ 406.8
======== ======== ========= =========
Segment earnings contribution
Products Pipelines (1) $ 117.6 $ 131.3 $ 349.1 $ 377.1
Natural Gas Pipelines (1) 159.7 125.7 496.8 373.5
CO2 114.1 64.4 358.8 177.6
Terminals (1) 101.4 87.2 307.7 254.3
Kinder Morgan Canada (1) (2) 32.1 16.4 80.6 33.6
General and administrative
(1) (9) (10) (76.8) (60.3) (228.0) (188.3)
Interest, net (1) (9) (99.8) (103.0) (296.4) (290.7)
Minority interest (1) (9) (3.3) (2.8) (11.4) (8.3)
Certain items
Trans Mountain before
dropdown - - - 14.9
Trans Mountain goodwill
impairment - - - (377.1)
Allocated non-cash long-
term compensation (1.4) (1.4) (4.2) (24.8)
Loss on debt retirement - - - (1.0)
Environmental reserves - - - (2.2)
Legal reserves and
settlements (9.5) (43.3) (9.5) (43.3)
Gain on sale (3) - - 14.3 -
Mark to market of certain
upstream hedges (4) 12.2 - (0.9) -
Hurricanes and fires (5) (15.5) (0.8) (15.5) (1.2)
Other (6) (1.2) - (2.9) (1.5)
Minority interest 0.2 0.4 0.2 4.4
-------- -------- --------- ---------
Sub-total certain items (15.2) (45.1) (18.5) (431.8)
-------- -------- --------- ---------
Net income $ 329.8 $ 213.8 $1,038.7 $ 297.0
======== ======== ========= =========
Less: General Partner's
interest in net income (205.6) (155.8) (588.9) (440.1)
-------- -------- --------- ---------
Limited Partners' net
income (loss) $ 124.2 $ 58.0 $ 449.8 $ (143.1)
======== ======== ========= =========
Net income before certain
items $ 345.0 $ 258.9 $1,057.2 $ 728.8
Less: General Partner's
interest in net income
before certain items (205.8) (156.2) (589.1) (444.4)
-------- -------- --------- ---------
Limited Partners' net income
before certain items 139.2 102.7 468.1 284.4
Depreciation, depletion and
amortization (7) 177.5 144.2 518.4 412.8
Book (cash) taxes - net 8.5 14.7 (10.4) 20.7
Sustaining capital
expenditures (8) (43.3) (31.8) (120.1) (95.0)
-------- -------- --------- ---------
DCF before certain items $ 281.9 $ 229.8 $ 856.0 $ 622.9
======== ======== ========= =========
Net income / unit before
certain items $ 0.54 $ 0.43 $ 1.83 $ 1.21
======== ======== ========= =========
DCF / unit before certain
items $ 1.09 $ 0.96 $ 3.35 $ 2.65
======== ======== ========= =========
Weighted average units
outstanding 258.8 239.0 255.5 235.1
======== ======== ========= =========
(1) Excludes certain items
(2) Trans Mountain segment name has been changed to Kinder Morgan
Canada and includes acquisition of Express and Jet Fuel
effective August 31, 2008
(3) Gain on sale of North and Thunder Creek Systems
(4) Upstream asset discontinued hedge accounting during the 2nd
quarter of 2008. Actual gain or loss will continue to be taken
into account in earnings before DD&A at time of physical
transaction
(5) 2007 - Hurricanes Katrina and Rita
2008 - Hurricanes Gustav and Ike; Pasadena, Port Sutton,
and River Terminal Fires
(6) 2007 - Imputed interest on Cochin acquisition, Trans Mountain
acquisition costs, FX gain on Cochin note payable
2008 - Imputed interest on Cochin acquisition, FX loss on
Cochin note payable
(7) Includes Kinder Morgan Energy Partner's (KMP) share of Rockies
Express (REX) DD&A - 2007 - $2.4 million and $5.9 million for
the 3rd quarter and year to date respectively
2008 - $9.3 million and $23.6 million for the 3rd quarter
and year to date respectively
(8) Includes KMP's share of REX sustaining capital expenditures
(9) Certain items
2007 3rd quarter - Products Pipelines $(17.3), Terminals
$(25.0), general and administrative expense $(2.7),
interest expense $(0.5), minority interest $0.4
2007 year to date - Products Pipelines $(18.7), Natural
Gas Pipelines $(1.0), Terminals $(23.2), Kinder Morgan
Canada $(349.2) earnings before DD&A and $(6.3) DD&A ,
general and administrative expense $(34.4), interest
expense $(2.9), minority interest $3.9
2008 3rd quarter - Products Pipelines $(10.2), Natural Gas
Pipelines $7.8, Terminals $(12.3), interest expense
$(0.7), minority interest $0.2
2008 year to date - Products Pipelines $(9.6), Natural Gas
Pipelines $7.7, Terminals $(12.3), general and
administrative expense $(2.8), interest expense $(1.7),
minority interest $0.2
(10) General and administrative expense on this page includes income
tax that is not allocable to the segments of $(3.7) and $(8.1)
for 3rd quarter 2008 and year to date 2008, respectively.
Volume Highlights
(historical pro forma for acquired assets)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Products Pipelines
Gasoline 101.1 111.2 299.5 332.0
Diesel 40.0 42.1 120.2 122.2
Jet Fuel 29.6 31.9 89.2 94.0
--------- --------- --------- ---------
Total Refined Product
Volumes (MMBbl) 170.7 185.2 508.9 548.2
NGL's 5.8 7.4 18.7 22.8
--------- --------- --------- ---------
Total Delivery Volumes
(MMBbl) (1) 176.5 192.6 527.6 571.0
Natural Gas Pipelines (2)
Transport Volumes (Bcf) 559.0 441.7 1,599.5 1,276.2
Sales Volumes (Bcf) 220.0 224.4 660.0 641.0
CO2
Delivery Volumes (Bcf)
(3) 171.3 150.4 530.1 472.6
Sacroc Oil Production -
Gross (MBbl/d) (4) 27.9 27.3 27.6 28.4
Sacroc Oil Production -
Net (MBbl/d) (5) 23.3 22.8 23.0 23.6
Yates Oil Production
Gross - (MBbl/d) (4) 27.1 27.1 27.9 26.7
Yates Oil Production -
Net (MBbl/d) (5) 12.0 12.0 12.4 11.9
NGL Sales Volumes
(MBbl/d) (6) 7.6 10.0 8.7 9.8
Realized Weighted Average
Oil Price per Bbl (7)
(8) $ 51.45 $ 36.77 $ 51.50 $ 35.56
Realized Weighted Average
NGL Price per Bbl (8) $ 77.97 $ 53.68 $ 73.37 $ 48.66
Terminals
Liquids Leasable Capacity
(MMBbl) 54.2 46.3 54.2 46.3
Liquids Utilization % 98.2% 96.5% 98.2% 96.5%
Bulk Transload Tonnage
(MMtons) 26.8 24.5 76.5 72.7
Trans Mountain (Mbbls -
mainline throughput) 22.6 25.3 63.5 70.1
(1) Includes Pacific, Calnev, (5) Represents KMP's net share of
Plantation, Central Florida, the production from the field
Cochin and Cypress
(2) Includes KMIGT, Texas (6) Net to KMP
Intrastates, KMNTP,
Monterrey, Trailblazer,
TransColorado and REX (7) Includes all KMP crude oil
Pipeline volumes properties
(3) Includes Cortez, Central (8) Hedge gains/losses for Oil and
Basin, CRC, CLPL and PCPL NGLs are included with Crude
pipeline volumes Oil
(4) Represents 100% production
from the field
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
PRELIMINARY ABBREVIATED CONSOLIDATED BALANCE SHEET
(Unaudited)
(in millions)
September 30, December 31,
2008 2007
--------------- --------------
ASSETS
Cash and cash equivalents $ 53 $ 59
Other current assets 1,119 1,151
Property, plant and equipment, net 12,983 11,591
Investments 943 655
Deferred charges and other assets 1,941 1,722
--------------- --------------
TOTAL ASSETS $ 17,039 $ 15,178
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Notes payable and current maturities of
long-term debt $ 266 $ 610
Other current liabilities 1,940 1,948
Long-term debt 8,075 6,456
Value of interest rate swaps 213 152
Other 1,738 1,522
Minority interest 58 54
Partners' capital
Accumulated other comprehensive loss (1,536) (1,276)
Other partners' capital 6,285 5,712
--------------- --------------
Total partners' capital 4,749 4,436
--------------- --------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 17,039 $ 15,178
=============== ==============
Total Debt, net of cash and cash
equivalents, and excluding the value
of interest rate swaps $ 8,288 $ 7,007
Segment earnings before DD&A and
certain items $ 2,688 $ 2,223
G&A (285) (246)
Income taxes 69 67
--------------- --------------
EBITDA (1) $ 2,472 $ 2,044
Debt to EBITDA 3.4 3.4
(1) 2008 EBITDA is last twelve months
Source: Kinder Morgan Energy Partners, L.P.
