HOUSTON--(BUSINESS WIRE)--Jan. 21, 2009--Kinder Morgan Energy Partners, L.P. (NYSE:KMP) today increased its
quarterly cash distribution per common unit to $1.05 ($4.20 annualized)
from $1.02 per unit ($4.08 annualized). Payable on Feb. 13, 2009, to
unitholders of record as of Jan. 30, 2009, the distribution represents a
14 percent increase over the fourth quarter 2007 cash distribution per
unit of $0.92 ($3.68 annualized). KMP has increased the distribution 35
times since current management took over in February of 1997. In total,
KMP declared cash distributions for 2008 of $4.02 per unit, meeting its
published annual budget and 16 percent higher than declared cash
distributions of $3.48 per unit in 2007.
KMP produced 2008 distributable cash flow before certain items of $1.07
billion, up 23 percent from $865 million in 2007. Distributable cash
flow per unit before certain items was $4.15, up 14 percent from $3.65
in 2007. Net income for 2008 before certain items was $1.3 billion, up
30 percent from $1.03 billion last year. Including certain items, net
income for the year was $1.3 billion, up 124 percent from $590.3 million
in 2007.
Fourth quarter distributable cash flow before certain items was
$211 million, compared to $242.1 million for the comparable period of
2007. Fourth quarter distributable cash flow per unit before certain
items was $0.81, compared to $1.00 per unit for the same period last
year. Fourth quarter net income before certain items was $280.7 million,
compared to $299.3 million for the fourth quarter of 2007. Including
certain items, net income for the fourth quarter was $284.6 million
compared to $293.3 million for the same period last year.
Chairman and CEO Richard D. Kinder said, "KMP had a very good year, as
we achieved our financial target for 2008 of $4.02 in cash distributions
per unit. When you consider the tumultuous market conditions experienced
during the past year, I'm very proud of KMP's accomplishments. Our
diversified portfolio of stable assets generated strong cash flow with
total 2008 segment earnings before DD&A and certain items of $2.8
billion, up 24 percent from $2.2 billion in 2007. We generated $4.15 per
unit in distributable cash flow for the year, which gives us excess
coverage of distributable cash flow before certain items above
distributions of $33 million, almost triple our published annual budget.
We beat our annual targets despite fourth quarter results that were
impacted by some timing-related and unusual items, such as the back-end
loading of sustaining capital expenditures and lost business due to
hurricanes, and by some general economic factors, such as lower crude
oil prices and a weakened Canadian dollar. In the past five weeks, we
demonstrated that we have the ability to access capital even in
difficult times, raising over $1 billion by issuing debt, equity and
unwinding interest rate swaps. We also continue to execute our
multi-billion dollar capital investment program, and we have made
tremendous progress on various projects (some of which will come on line
in 2009) that will drive the company's future growth."
Overview of Business Segments
The Products Pipelines business produced fourth quarter segment
earnings before DD&A and certain items of $153.2 million, up 11 percent
from $138.5 million for the comparable period in 2007. For the year,
this segment generated $571.5 million in earnings before DD&A and
certain items, short of its published annual budget of 5 percent growth
($612.7 million). The shortfall was driven by lower volumes as a result
of extremely high products prices and a recessionary environment.
Adjusting for the sale of the North System, which contributed over $28
million in earnings before DD&A in 2007 before being sold in the fourth
quarter of that year, segment earnings before DD&A and certain items
were up 2.5 percent in 2008.
"In the fourth quarter and for the year, Products Pipelines benefited
from improved financial performances at the Southeast and West Coast
terminals, along with the Cochin and Central Florida pipelines, compared
to 2007," Kinder said. "Segment highlights included investing
approximately $46 million in 2008 to further upgrade and modify existing
facilities which enabled us to generate additional revenues by handling
more ethanol. In the fourth quarter, we completed construction of a new
terminal consisting of four new fuel storage tanks with a capacity of
320,000 barrels to serve two military bases in California, successfully
commenced commercial ethanol transportation service on the Central
Florida Pipeline and acquired a strategically located liquids storage
terminal in Phoenix."
For the year, total refined products revenues were up 0.8 percent and
volumes were down 7.1 percent (excluding Plantation, revenues were up
1.5 percent and volumes were down 5.9 percent). Total refined products
revenues were down 2.1 percent and volumes were down 6.6 percent
compared to the fourth quarter of 2007 (excluding Plantation revenues
were up 0.8 percent and volumes were down 6.4 percent). Gasoline volumes
were down 8.5 percent, diesel volumes were down 3.8 percent and jet
volumes were down 6.2 percent for the year.
The Natural Gas Pipelines business produced fourth quarter
segment earnings before DD&A and certain items of $198.8 million, up 11
percent from $178.5 million for the fourth quarter of 2007. For the
year, this segment produced $746.8 million in earnings before DD&A and
certain items, up 24 percent from 2007 and significantly above its
published annual budget of 18 percent growth ($706 million).
"This segment had an outstanding year led by Rockies Express-West, which
began service in January 2008 and reached full operations in May, and
the Texas Intrastate Pipeline Group," Kinder said. "TransColorado
contributed to this segment's success by producing better results than
in 2007 due to a completed expansion, and KMIGT also had improved
results compared to the previous year. Segment earnings before DD&A and
certain items would have been even higher if not for lost business in
the Texas intrastates from Hurricane Ike."
Growth by the Texas intrastates for the year was attributable to
increased transportation and storage revenue from long-term contracts,
higher sales margins, and greater processing volumes and margins.
For the year, overall segment transport volumes were up 26 percent
compared to 2007, primarily due to REX-West being operational. Sales
volumes at the intrastates were relatively flat.
The CO2 business delivered fourth quarter
segment earnings before DD&A and certain items of $140.5 million, down
from $144.9 million from the same period in 2007. For the year, this
segment generated earnings before DD&A and certain items of $760.2
million, up 42 percent from 2007 and ahead of its published annual
budget of 40 percent growth ($750.9 million).
"CO2 had a good fourth quarter operationally, but our results
were significantly impacted by lower oil prices on unhedged volumes and
lost business due to Hurricane Ike, which resulted in a decrease in NGL
sales due to a third-party fractionation facility being down," Kinder
said. "Nevertheless, this segment had a terrific year with over 40
percent growth compared to 2007, driven by increased CO2
sales and transport volumes, solid oil production at the SACROC and
Yates units, higher hedge prices and higher pricing for much of the
year."
For the quarter, average oil production at SACROC was 29.2 thousand
barrels per day (MBbl/d), up 16 percent from the same period last year.
Average oil production at the Yates Field was 26.7 MBbl/d, down from
27.8 MBbl/d in the fourth quarter of 2007. CO2 delivery
volumes were up 23 percent compared to the fourth quarter last year due
to expansion projects in southwest Colorado that increased CO2
production. For the year, average oil production was 28 MBbl/d at SACROC
and 27.6 MBbl/d at Yates. CO2 delivery volumes were up 15
percent from 2007.
The CO2 segment is an area where KMP is exposed to commodity
price risk, but that risk is partially 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 $43.35 for the fourth quarter and $49.42 for the year. The realized
weighted average NGL price per barrel, allocating none of the hedges to
NGLs, was $26.34 for the quarter and $63 for the year.
The Terminals business reported fourth quarter segment earnings
before DD&A and certain items of $140.3 million, up 13 percent from
$124.2 million for the comparable period in 2007. For the year, this
segment produced $538.9 million before DD&A and certain items, up 22
percent from 2007 and just short of its published annual budget of 24
percent growth ($550.2 million).
"The Terminals business would have almost met its annual budget if not
for lost business associated with the hurricanes, and actually would
have exceeded its budget had it not also incurred higher operational
costs for much of the year due to higher diesel prices," Kinder said.
"All of this segment's growth in the fourth quarter came from organic
opportunities, as did two-thirds of its growth for the year."
Fourth quarter results were driven by a 20 percent increase in coal
volumes (particularly at the Pier IX Terminal located in Newport News,
Va., and the Cora Terminal in Chester, Ill., which had record throughput
in December), a 29 percent increase in throughput at the company's New
York Harbor terminals and increased capacity at the Houston Ship Channel
facilities due to tank expansions. For the year, expansions also drove
internal growth at the company's liquids terminals on the Houston Ship
Channel, in New York Harbor, at the North 40 Terminal near Edmonton,
Alberta, and at Vancouver Wharves in British Columbia, as KMP's leasable
capacity increased by 14 percent to 54 million barrels. Results in 2008
also benefited from acquisitions such as Marine Terminals and Vancouver
Wharves, which were purchased in September and May of 2007, respectively.
Kinder Morgan Canada (formerly referred to as the Trans Mountain
segment) produced fourth quarter segment earnings before DD&A and
certain items of $37.6 million, up substantially from $14.2 million for
the same period in 2007. For the year, this segment recorded $140.8
million in earnings before DD&A and certain items, up 148 percent from
2007 and just short of its published annual budget of 161 percent growth
($148.5 million). This segment was almost on plan in Canadian dollars,
but was negatively impacted by the weakened Canadian dollar.
"This segment's solid results for the quarter primarily reflect the
completion of the Anchor Loop expansion of the Trans Mountain Pipeline,
which boosted capacity to 300,000 barrels per day and resulted in a
higher tariff, and the acquisition of the Express-Platte pipeline system
and a jet fuel pipeline from Knight Inc., in August of 2008," Kinder
said. "For the year, this segment also benefited from a full year of
contributions from Trans Mountain, which was acquired by KMP April 30,
2007."
Outlook
KMP previously announced that it expects to declare cash distributions
of $4.20 per unit for 2009, a 4.5 percent increase over 2008. "We
continue to be well positioned for future growth and anticipate that our
business segments will generate over $3 billion of earnings before DD&A
in 2009," Kinder said. "Growth will be driven by the continuation of our
substantial capital investment program, which includes both expansions
of existing assets along with new projects. As examples, we have three
major natural gas projects scheduled to begin service in 2009."
The 2009 budget assumes an average West Texas Intermediate (WTI) crude
oil price of $68 per barrel for the year. The majority of cash generated
by KMP is fee based and is not sensitive to commodity prices. In its CO2
segment, the company hedges the majority of its oil production but does
have exposure to unhedged volumes, most of which are natural gas
liquids. For 2009, every $1 change in the average WTI crude oil price
per barrel is expected to impact the CO2 segment by
approximately $6 million (or about 0.2 percent of our combined business
segments' anticipated distributable cash flow). If the average WTI crude
oil price per barrel in 2009 were the same as the price experienced in
2008 (about $100 per barrel), then KMP would generate distributable cash
flow that could support cash distributions of approximately $4.52 per
unit for 2009. This sensitivity to the WTI price is very similar to what
the company experienced in 2008. KMP will hold its annual investor
conference in Houston Jan. 29 (which will be webcast live on www.kindermorgan.com)
to discuss in detail its outlook for this year.
Kinder Morgan Management, LLC (NYSE:KMR) also expects to declare
distributions of $4.20 per share for 2009.
Projects
Below is a status update on numerous capital projects that KMP is in
various stages of building.
Products Pipelines
- KMP's approximately $25 million project to construct four new military
fuel storage tanks totaling 320,000 barrels and ancillary facilities to
provide uninterrupted fuel service to the Marine Corps Air Station in
Miramar, Calif., and the Naval Air Station in Point Loma, Calif., became
operational in December, several months ahead of schedule.
- KMP began transporting commercial batches of denatured ethanol along
with gasoline shipments in its 16-inch Central Florida Pipeline (CFPL)
from Tampa to Orlando last month. In total, the company has approved
over $90 million in ethanol and biofuel projects including modifications
to tanks, truck racks and related infrastructure for new or expanded
ethanol and biodiesel service at various terminals in the Southeast and
Pacific Northwest. KMP offers offloading, storage and blending of
ethanol at its terminals in Florida, Georgia, South Carolina, North
Carolina, Virginia, Pennsylvania, New York, Illinois, Tennessee,
Mississippi, Louisiana, Texas, California, Nevada, Arizona, Washington
and Oregon.
- In the fourth quarter, Kinder Morgan successfully conducted a test
movement of 20,000 barrels of blended biodiesel (a 5 percent blend or
"B5") in a segment of the Plantation Pipe Line system that transports
gasoline and diesel from Collins, Miss., to Spartanburg, S.C. The
company now anticipates having the capability to move blended B5 to the
following markets along Plantation during 2009 - Birmingham and Oxford,
Ala., Bremen, Atlanta, Athens and Hartwell, Ga., Belton and Spartanburg,
S.C., Charlotte and Greensboro, N.C., and Roanoke, Va. Kinder Morgan
currently stores, blends and loads trucks of biodiesel blends at its
Portland, Ore., and Seattle, Wash., terminals and receives waterborne
biodiesel imports for storage and breakout for local retail demand at
its Tampa terminal.
- KMP purchased a liquids terminal in Phoenix, Ariz., from ConocoPhillips
for approximately $29 million, including upgrades, in December. 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.
Natural Gas Pipelines
The total estimate for KMP's share of capital expenditures on its large
natural gas projects remains virtually unchanged since the third quarter
of 2008. Construction is ongoing on the Rockies Express, Midcontinent
Express and Kinder Morgan Louisiana pipelines. While the forecast
includes costs for winter construction, weather conditions may continue
to impact contractor productivity which could further impact costs and
schedules.
- Construction continues on REX-East. 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 (REX-West) has been fully operational since May 2008.
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 has been revised to $6.2 billion from $6 billion.
- Construction continues on the Midcontinent Express Pipeline (MEP).
Including a fully subscribed expansion that was recently added to the
project to increase available pipeline capacity and cash flow, the MEP
project budget is approximately $1.9 billion. 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. Subject to receipt of regulatory approvals, interim service
on the first portion of the pipeline to eastern Louisiana is expected to
be available by April 1, 2009. The second construction phase to Transco
is expected to be completed by Aug. 1, 2009. In July 2008, a successful
binding open season was completed that increases commitments on the main
segment of MEP's Zone 1 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.
- 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 budget has been revised downward to
approximately $950 million from $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 third
quarter of 2009.
- Development of the new Fayetteville Express Pipeline (FEP) is underway.
A joint venture with Energy Transfer Partners, FEP is a 42-inch,
187-mile pipeline that will begin in Conway County, Ark., and end in
Panola 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 Bcf per day. Pending regulatory approvals, it is expected
to be in service by late 2010 or early 2011. KMP's cost estimate for
this project has been reduced by $50 million to $1.2 billion from the
prior estimate that rounded to $1.3 billion.
- Construction was completed in November on the approximately $39 million
Colorado Lateral expansion. The 41-mile pipeline is now in service and
part of the Kinder Morgan Interstate Gas Transmission (KMIGT) system,
transporting natural gas along the Front Range to a local distribution
company. The pipeline has an initial capacity of 74,000 dekatherms per
day.
- Construction was completed in October on an approximately $22 million
expansion project at KMIGT, which is now delivering natural gas to four
additional ethanol plant customers and an industrial end user located in
northeast Nebraska.
- The Texas intrastate group has completed two projects this month. An
approximately $85 million expansion project at the Markham storage
facility completed the debrining phase this month and created an
additional 7.5 Bcf of working storage capacity to the intrastate system.
In addition, the approximately $13 million Hill Country compression
project is now in service, providing 50,000 MMBtu of incremental
pipeline capacity primarily to the Austin market.
- The West Region Pipeline group is working on a 200,000 dekatherms per
day expansion of the westernmost zone of the REX system. The expansion
is fully contracted and expected to be operational in April 2010.
Submittal of the FERC application seeking approval to construct and
operate the expansion is expected by the end of January 2009.
CO2
- The approximately $290 million southwest Colorado CO2 expansion is
nearing completion and will ultimately increase CO2supplies by about 300
million cubic feet (MMcf) per day to customers. The Doe Canyon source
field began operations in January 2008 and is currently delivering 120
MMcf per day. The Goodman Point expansion at the McElmo Dome source
field was completed in December and the plant is currently delivering
210 MMcf per day. The expansion of the Cortez Pipeline continued with
the activation of the Blanco Pump Station in the fourth quarter,
utilizing power from diesel generators. Construction will begin this
month on a power line to connect the pumps to the power grid and it is
expected to be in service this summer. Current deliveries on the Cortez
Pipeline are about 1,260 MMcf per day.
Terminals
- In December 2008, KMP began operations at its approximately $47 million
terminal in Geismar, La., which offers liquids storage, transfer and
packaging facilities. The newly constructed terminal has liquids storage
capacity of about 123,500 barrels and approximately 144,000 square feet
of warehouse space. The facility is capable of handling inbound and
outbound material via pipeline, rail, truck and barge/vessel. The
terminal also offers rail siding for up to 24 cars with expansion
capabilities to build tank car loading racks for future transload
services.
- An approximately $13 million expansion continues 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.
Kinder Morgan Canada
- The Mount Robson portion of the Anchor Loop project, which increased
capacity on the Trans Mountain pipeline system to 300,000 barrels per
day (bpd), began service in November 2008. The Jasper portion, which
began service in April 2008, 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. The cost of the
project was approximately $544 million.
Other News
- During the last five weeks, KMP has raised over $1 billion by issuing
debt, equity and unwinding interest rate swaps. KMP issued $500 million
in 10-year senior notes, with a put in year three, which were priced to
yield 9 percent. This transaction closed on Dec. 19. The company also
issued 3.9 million units of KMP equity in a common unit offering,
raising approximately $177 million in net proceeds. This transaction
closed Dec. 22. Additionally, KMP reversed fixed to floating interest
rate swaps and received almost $340 million in cash, including a swap
unwound earlier this month. KMP's interest rate swap portfolio was still
worth approximately $600 million on Jan. 16, following these unwinds.
Kinder Morgan Management, LLC
Shareholders of Kinder Morgan Management, LLC will also receive a $1.05
distribution ($4.20 annualized) payable on Feb. 13, 2009, to
shareholders of record as of Jan. 30, 2009. 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
170 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, Jan. 21, at www.kindermorgan.com
for a LIVE webcast conference call on the company's fourth 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 Dec. 31, Twelve Months Ended Dec. 31,
2008 2007 2008 2007
Revenues $ 2,291.5 $ 2,448.8 $ 11,740.3 $ 9,217.7
Costs, expenses and
other
Operating expenses 1,645.1 1,955.2 8,998.9 7,071.9
Depreciation,
depletion and 205.3 138.2 695.8 540.0
amortization
General and 75.2 56.0 297.9 278.7
administrative
Taxes, other than 39.7 41.8 186.7 153.8
income taxes
Other expense 1.3 0.4 2.6 365.6
(income)
1,966.6 2,191.6 10,181.9 8,410.0
Operating income 324.9 257.2 1,558.4 807.7
Other income
(expense)
Earnings from equity 42.3 18.3 160.8 69.7
investments
Amortization of
excess cost of equity (1.4 ) (1.5 ) (5.7 ) (5.8 )
investments
Interest, net (101.5 ) (101.1 ) (395.3 ) (391.4 )
Other, net 1.0 4.8 31.5 14.2
Minority interest (2.7 ) (2.6 ) (13.9 ) (7.0 )
Income from
continuing operations 262.6 175.1 1,335.8 487.4
before income taxes
Income taxes 22.0 (34.6 ) (13.8 ) (71.0 )
Income from 284.6 140.5 1,322.0 416.4
continuing operations
Income from
discontinued - 152.8 1.3 173.9
operations
Net income $ 284.6 $ 293.3 $ 1,323.3 $ 590.3
Calculation of
Limited Partners'
interest in net
income (loss)
Income from $ 284.6 $ 140.5 $ 1,322.0 $ 416.4
continuing operations
Less: General (217.1 ) (170.0 ) (806.0 ) (609.9 )
Partner's interest
Limited Partners' 67.5 (29.5 ) 516.0 (193.5 )
interest
Add: Limited
Partners' interest in - 151.3 1.3 172.2
discontinued
operations
Limited Partners'
interest in net $ 67.5 $ 121.8 $ 517.3 $ (21.3 )
income (loss)
Diluted Limited
Partners' net income
(loss) per unit
Income (loss) from $ 0.26 $ (0.12 ) $ 2.01 $ (0.82 )
continuing operations
Income from
discontinued $ - $ 0.62 $ - $ 0.73
operations
Net income (loss) $ 0.26 $ 0.50 $ 2.01 $ (0.09 )
Weighted average 262.0 242.3 257.2 236.9
units outstanding
Declared distribution $ 1.05 $ 0.92 $ 4.02 $ 3.48
/ unit
Three Months Ended Dec. 31, Twelve Months Ended Dec. 31,
2008 2007 2008 2007
Segment earnings
before DD&A and
amortization of
excess investments
Products Pipelines $ 137.5 $ 140.9 $ 546.2 $ 569.6
Natural Gas Pipelines 204.9 178.9 760.6 600.2
CO2 140.2 144.7 759.9 537.0
Terminals 137.5 121.0 523.8 416.0
Kinder Morgan Canada 56.9 12.9 160.1 (293.6 )
$ 677.0 $ 598.4 $ 2,750.6 $ 1,829.2
Kinder Morgan Energy Partners, L.P. and Subsidiaries
Preliminary Earnings Contribution by Business Segment
(Unaudited)
(in millions except per unit amounts)
Three Months Ended Dec. 31, Twelve Months Ended Dec. 31,
2008 2007 2008 2007
Segment earnings
before DD&A and
amortization of
excess investments
(1)
Products Pipelines $ 153.2 $ 138.5 $ 571.5 $ 585.9
(8)
Natural Gas Pipelines 198.8 178.5 746.8 600.8
(8)
CO2 (8) 140.5 144.9 760.2 537.2
Terminals (8) 140.3 124.2 538.9 442.4
Kinder Morgan Canada 37.6 14.2 140.8 56.9
(1) (8)
Total $ 670.4 $ 600.3 $ 2,758.2 $ 2,223.2
Segment DD&A and
amortization of
excess investments
Products Pipelines $ 23.5 $ 22.3 $ 92.7 $ 92.6
Natural Gas Pipelines 17.7 16.4 68.9 65.2
CO2 126.9 69.5 387.8 284.2
Terminals 31.7 25.4 122.6 89.3
Kinder Morgan Canada 6.9 6.1 29.5 15.2
(1) (8)
Total $ 206.7 $ 139.7 $ 701.5 $ 546.5
Segment earnings
contribution
Products Pipelines $ 129.7 $ 116.2 $ 478.8 $ 493.3
(8)
Natural Gas Pipelines 181.1 162.1 677.9 535.6
(8)
CO2 (8) 13.6 75.4 372.4 253.0
Terminals (8) 108.6 98.8 416.3 353.1
Kinder Morgan Canada 30.7 8.1 111.3 41.7
(1) (8)
General and
administrative (8) (74.2 ) (57.2 ) (302.2 ) (245.5 )
(9)
Interest, net (8) (106.1 ) (101.5 ) (402.5 ) (392.2 )
Minority interest (8) (2.7 ) (2.6 ) (14.1 ) (10.9 )
Certain items
Trans Mountain before - - - 14.9
dropdown
Trans Mountain - - - (377.1 )
goodwill impairment
Trans Mountain tax 19.3 19.3 -
rate adjustment (10)
Allocated non-cash
long-term (1.4 ) (1.3 ) (5.6 ) (26.2 )
compensation
Loss on debt - - - (1.0 )
retirement
Environmental (9.2 ) (15.5 ) (9.2 ) (17.7 )
reserves
Legal reserves and (1.8 ) (140.1 ) (11.3 ) (183.3 )
settlements
Gain on sale (2) - 152.8 14.3 152.8
Mark to market of
certain upstream 6.5 - 5.6 -
hedges (3)
Hurricanes and fires (2.8 ) - (18.3 ) 0.1
(4)
Other (5) (6.7 ) (1.9 ) (9.6 ) (4.2 )
Minority interest - - 0.2 3.9
Sub-total certain 3.9 (6.0 ) (14.6 ) (437.8 )
items
Net income $ 284.6 $ 293.3 $ 1,323.3 $ 590.3
Less: General
Partner's interest in (217.1 ) (171.5 ) (806.0 ) (611.6 )
net income
Limited Partners' net $ 67.5 $ 121.8 $ 517.3 $ (21.3 )
income (loss)
Net income before $ 280.7 $ 299.3 $ 1,337.9 $ 1,028.1
certain items
Less: General
Partner's interest in (217.0 ) (171.6 ) (806.1 ) (616.0 )
net income before
certain items
Limited Partners' net
income before certain 63.7 127.7 531.8 412.1
items
Depreciation,
depletion and 216.2 142.0 734.6 554.8
amortization (6)
Book (cash) taxes - (8.3 ) 30.0 (18.7 ) 50.7
net
Sustaining capital (60.5 ) (57.6 ) (180.6 ) (152.6 )
expenditures (7)
DCF before certain $ 211.0 $ 242.1 $ 1,067.0 $ 865.0
items
Net income / unit $ 0.24 $ 0.53 $ 2.07 $ 1.74
before certain items
DCF / unit before $ 0.81 $ 1.00 $ 4.15 $ 3.65
certain items
Weighted average 262.0 242.3 257.2 236.9
units outstanding
(1) Trans Mountain segment name has been changed to Kinder Morgan Canada and
includes acquisition of Express and Jet Fuel effective August 31, 2008
(2) Gain on sale of North and Thunder Creek Systems
Upstream asset discontinued hedge accounting during the 2nd quarter of
(3) 2008. Actual gain or loss will continue to be taken into account in
earnings before DD&A at time of physical transaction
(4) 2007 - Hurricanes Katrina and Rita
2008 - Hurricanes Hanna, Gustav and Ike; Pasadena, Port Sutton, and River
Terminal Fires
2007 - Imputed interest on Cochin acquisition, Trans Mountain acquisition
(5) costs, insurance policy cancellation charges, FX gain on Cochin note
payable
2008 - Imputed interest on Cochin acquisition, FX loss on Cochin note
payable, expense related to Express dropdown, expense related to SFAS141
acquisition cost pronouncement, product loss reserve, asset retirement /
write-off
Includes Kinder Morgan Energy Partner's (KMP) share of Rockies Express
(6) (REX) DD&A - 2007 - $2.3 million and $8.3 million for the 4th quarter and
year to date respectively
2008 - $9.5 million and $33.2 million for the 4th quarter and year to date
respectively
(7) Includes KMP's share of REX sustaining capital expenditures
(8) Excludes certain items;
2007 4th quarter - Products Pipelines $2.4, Natural Gas Pipelines $0.4, CO2
$(0.2), Terminals $(3.2), Kinder Morgan Canada $(1.3), general and
administrative expense $(3.4), interest expense $(0.7)
Full year 2007 - Products Pipelines $(16.3), Natural Gas Pipelines $(0.6),
CO2 $(0.2), Terminals $(26.4), Kinder Morgan Canada $(350.5) earnings
before DD&A and $(6.3) DD&A , general and administrative expense $(37.8),
interest expense $(3.6), minority interest $3.9
2008 4th quarter - Products Pipelines $(15.6), Natural Gas Pipelines $6.1,
CO2 $(0.3), Terminals $(2.8), Kinder Morgan Canada $19.2, general and
administrative expense $(2.2), interest expense $(0.5)
2008 year to date - Products Pipelines $(25.2), Natural Gas Pipelines
$13.8, CO2 $(0.3), Terminals $(15.1), Kinder Morgan Canada $19.2, general
and administrative expense $(5.0), interest expense $(2.2), minority
interest $0.2
General and administrative expense on this page includes income tax that is
(9) not allocable to the segments of $(1.2) and $(9.3) for 4th quarter 2008 and
full year 2008, respectively.
(10) Gain generated from reduction in deferred tax liability due to reduction in
statutory tax rate
Volume Highlights
(historical pro forma for acquired assets)
Three Months Ended Dec. 31, Twelve Months Ended Dec. 31,
2008 2007 2008 2007
Products Pipelines
Gasoline 98.9 103.5 398.4 435.5
Diesel 37.7 41.8 157.9 164.1
Jet Fuel 28.1 31.1 117.3 125.1
Total Refined Product 164.7 176.4 673.6 724.7
Volumes (MMBbl)
NGL's 8.6 7.5 27.3 30.4
Total Delivery 173.3 183.9 700.9 755.1
Volumes (MMBbl) (1)
Natural Gas Pipelines
(2)
Transport Volumes 556.8 436.4 2,156.3 1,712.6
(Bcf)
Sales Volumes (Bcf) 207.0 224.5 866.9 865.5
CO2
Delivery Volumes 202.0 164.7 732.1 637.3
(Bcf) (3)
Sacroc Oil Production 29.2 25.3 28.0 27.6
- Gross (MBbl/d) (4)
Sacroc Oil Production 24.3 21.1 23.3 23.0
- Net (MBbl/d) (5)
Yates Oil Production 26.7 27.8 27.6 27.0
Gross - (MBbl/d) (4)
Yates Oil Production 11.9 12.3 12.3 12.0
- Net (MBbl/d) (5)
NGL Sales Volumes 7.3 9.0 8.4 9.6
(MBbl/d) (6)
Realized Weighted
Average Oil Price per $ 43.35 $ 37.57 $ 49.42 $ 36.05
Bbl (7) (8)
Realized Weighted
Average NGL Price per $ 26.34 $ 66.67 $ 63.00 $ 52.91
Bbl (8)
Terminals
Liquids Leasable 54.2 47.5 54.2 47.5
Capacity (MMBbl)
Liquids Utilization % 97.5 % 95.9 % 97.5 % 95.9 %
Bulk Transload 22.6 23.5 99.1 96.2
Tonnage (MMtons)
Trans Mountain (Mbbls
- mainline 23.3 24.2 86.7 94.4
throughput)
Includes Pacific, Calnev, Represents KMP's net share of the
(1) Plantation, Central Florida, Cochin (5) production from the field
and Cypress
(2) Includes KMIGT, Texas Intrastates, (6) Net to KMP
KMNTP, Monterrey, Trailblazer,
TransColorado and REX Pipeline (7) Includes all KMP crude oil
volumes properties
(3) Includes Cortez, Central Basin, (8) Hedge gains/losses for Oil and NGLs
CRC, CLPL and PCPL pipeline volumes are included with Crude Oil
(4) Represents 100% production from the
field
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
PRELIMINARY ABBREVIATED CONSOLIDATED BALANCE SHEET
(Unaudited)
(in millions)
December 31, December 31,
2008 2007
ASSETS
Cash and cash equivalents $ 63 $ 59
Other current assets 1,160 1,151
Property, plant and equipment, net 13,254 11,591
Investments 954 655
Deferred charges and other assets 2,457 1,722
TOTAL ASSETS $ 17,888 $ 15,178
LIABILITIES AND PARTNERS' CAPITAL
Notes payable and current maturities of long-term $ 289 $ 610
debt
Other current liabilities 1,472 1,948
Long-term debt 8,275 6,456
Value of interest rate swaps 962 152
Other 755 1,522
Minority interest 71 54
Partners' capital
Accumulated other comprehensive loss (288 ) (1,276 )
Other partners' capital 6,352 5,712
Total partners' capital 6,064 4,436
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 17,888 $ 15,178
Total Debt, net of cash and cash equivalents, and $ 8,501 $ 7,007
excluding the value of interest rate swaps
Segment earnings before DD&A and certain items $ 2,758 $ 2,223
G&A (302 ) (246 )
Income taxes 33 67
EBITDA $ 2,489 $ 2,044
Debt to EBITDA 3.4 3.4
CONTACT: Kinder Morgan Energy Partners, L.P.
Larry Pierce, 713-369-9407
Media Relations
or
Mindy Mills, 713-369-9490
Investor Relations
www.kindermorgan.com
Source: Kinder Morgan Energy Partners, L.P.
