KINDER MORGAN, INC. annual report, FY2022

Kinder Morgan, Inc. — FY2022 Form 10-K

Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a standalone fourth-quarter filing. Kinder Morgan operates North American energy infrastructure, including approximately 83,000 miles of pipelines, 140 terminals, 700 Bcf of working natural gas storage capacity, and renewable natural gas (RNG) facilities.

Financial performance and position

Metric	2022	2021
Total revenue	$19.200 billion	$16.610 billion
Operating income	$4.065 billion	$2.916 billion
Net income attributable to KMI	$2.548 billion	$1.784 billion
Diluted EPS	$1.12	$0.78
Cash from operating activities	$4.967 billion	$5.708 billion
DCF, non-GAAP	$4.970 billion	$5.460 billion
Adjusted EBITDA, non-GAAP	$7.516 billion	$7.946 billion

Operating margin was approximately 21.2%, compared with 17.6% in 2021. Revenue growth reflected higher commodity sales and prices; commodity sales are reported alongside related costs, so revenue growth alone does not indicate equivalent growth in underlying earnings. Adjusted measures are non-GAAP and should be considered with GAAP results.

Segment EBDA (GAAP): Natural Gas Pipelines $4.801 billion, Products Pipelines $1.107 billion, Terminals $975 million, and CO₂ $819 million. Total segment EBDA increased 18% to $7.702 billion.
Debt and liquidity: Total debt was $31.673 billion excluding debt fair-value adjustments; balance-sheet debt was $31.788 billion including adjustments. Cash was $745 million, and available capacity under credit facilities was approximately $3.9 billion. Working capital was negative $3.127 billion. About $3.385 billion of debt was current at year-end.
Approximately $6.3 billion of debt was exposed to variable rates, including debt converted through swaps. The company reported about $31.7 billion of contractual principal payments and $21.2 billion of estimated interest payments over the disclosed maturity schedule.
Capital returns and investment: 2022 declared dividends were $1.11 per share, up 3%; share repurchases totaled $368 million. Sustaining capital expenditures were $901 million and discretionary capital investments were $1.709 billion.

Changes and notable developments

GAAP net income attributable to KMI rose 43%, chiefly because 2021 included a $1.6 billion non-cash impairment charge and 2022 benefited from stronger segment earnings. However, 2021 also included $1.092 billion of largely nonrecurring pretax earnings associated with the February 2021 winter storm.
Adjusted earnings declined to $2.636 billion from $3.004 billion; DCF fell to $4.970 billion from $5.460 billion. The largest adjusted segment decline was Natural Gas Pipelines, down $521 million, mainly reflecting nonrecurring storm-related Midstream earnings in 2021.
Operating cash flow decreased $741 million year over year. Investing cash use was $2.175 billion and financing cash use was $3.145 billion.
KMI acquired Mas Ranger for $358 million and North American Natural Resources for $132 million, adding landfill gas and RNG-related assets. It sold a 25.5% interest in Elba Liquefaction Company for net proceeds of $557 million and retained a 25.5% interest while continuing to operate and consolidate it.
In January 2023, the board increased share-repurchase authorization from $2 billion to $3 billion; approximately $2.1 billion remained available after the increase.

Outlook, risks, and contingencies

Management expected 2023 dividends of $1.13 per share, a 2% increase, and approximately $2.1 billion of expansion investments and joint-venture contributions. These are estimates, not guarantees.
Planned projects include pipeline expansions and three additional landfill-based RNG facilities; schedules and returns depend on permits, construction, contracts, and other approvals.
FERC approved a settlement for EPNG on January 31, 2023, providing for an average 16% reduction across mainline rate zones phased in over three years starting January 1, 2023, with a rate moratorium through September 30, 2027.
Key risks include substantial debt and refinancing needs, higher interest rates and inflation, commodity-price and volume exposure, customer credit risk, pipeline integrity and safety, cyber incidents, severe weather, regulatory and environmental compliance costs, and the energy transition. Long-term contracts and hedging mitigate some, but not all, exposure.
Ruby’s bankruptcy reorganization was confirmed in January 2023; KMI’s net settlement payment of approximately $28.5 million was accrued at year-end. Other disclosed matters include EPNG’s 2021 Arizona pipeline rupture, which caused two fatalities and one injury; the NTSB investigation was ongoing. KMI reported legal reserves of $70 million and environmental reserves of $221 million at year-end. Management said it did not expect the disclosed matters, based on current information and reserves, to have a material adverse impact; some potential liabilities remain difficult to estimate.
The financial statements received an unqualified audit opinion, and the auditor concluded internal control over financial reporting was effective. Goodwill of approximately $20.0 billion was a critical audit matter; the 2022 annual impairment test found no impairment, but results depend on estimates and assumptions.

Investor verification priorities

Reconcile GAAP net income growth with the decline in adjusted earnings and DCF, including the prior-year winter-storm benefit and impairment.
Review near-term maturities, refinancing completed after year-end, interest-rate exposure, and capacity under credit facilities.
Assess the cash-flow coverage and funding implications of planned dividends, buybacks, sustaining capital, and growth investment.
Track the financial and operational effects of the EPNG rate settlement, the Arizona rupture investigation, environmental matters, and other litigation.
Check project permitting, construction timing, customer commitments, and actual performance of RNG acquisitions and expansion projects.