Kinder Morgan Inc. (KMI) reported its total refined products volumes in the Products Pipelines segment were down 1% for the second quarter versus the same period in 2015, reflecting a decrease in East Coast volumes due to increased imports, partially offset by increased throughput on its West Coast assets.
"The Products Pipelines segment
was favorably impacted by higher volumes on the Kinder Morgan Crude and
Condensate pipeline (KMCC), the startup of the second petroleum
condensate processing facility along the Houston Ship Channel during
2015 and favorable performance on our Cochin system compared to 2015 due
to third-party operational constraints downstream of the pipeline which
occurred during the second quarter of 2015," said Steve Kean, CEO of
Kinder Morgan.
NGL volumes were flat with the same period last year. Crude and condensate pipeline volumes were up 11% from the second quarter of 2015 primarily due to higher volumes on KMCC.
KMI reported stronger year-on-year earnings contributions from its Terminals, Products Pipelines and Canadian business segments in the second quarter, but it saw lower earnings from its CO2 and Natural Gas Pipelines divisions.
The Terminals segment experienced strong performance at KMI's liquids terminals, which comprise more than 75% of the segment's business.
Growth in the liquids business during the quarter versus the second quarter of 2015 was driven by various expansions across its network, including contributions from new operations at its Edmonton Rail, Galena Park, Pasadena and Deer Park Rail terminals.
Contributions from KMI's interest in the newly formed refined products terminals joint venture with BP, its Vopak terminals acquisition and the Jones Act tankers also contributed significantly to growth in this segment, Kean said. The Lone Star State and Magnolia State tankers were delivered in December 2015 and May 2016, respectively.
Growth from the liquids terminals was partially offset by a decline in the bulk terminals as compared to the same period in 2015. This reduction was driven by the bankruptcies of coal customers Arch Coal, Alpha Natural Resources and Peabody Energy, which had a negative year-over-year impact of approximately $19 million for the quarter.
Kinder Morgan Canada experienced high demand for capacity on the Trans Mountain pipeline system in the second quarter, with mainline throughput into Washington state up 25% from the same period last year. This was partially offset by an unfavorable foreign exchange rate, as the Canadian dollar declined in value against the U.S. dollar by approximately 5% since the second quarter of 2015.
KMI reported second-quarter net income available to common stockholders of $333 million, unchanged from the second quarter of 2015, and distributable cash flow of $1,050 million versus $1,095 million for the comparable period in 2015.
The decrease in distributable cash flow for the quarter was primarily attributable to lower contributions from the CO2 segment primarily due to lower commodity prices, higher preferred stock dividends and higher cash taxes, partially offset by increased contributions from the Products Pipelines and Terminals segments as well as lower interest expense.
Net income available to common stockholders was also impacted by a positive $31 million change in total certain items for the quarter from the second quarter of 2015, including a $39 million payment received for early termination of a customer storage contract in the Texas Intrastate Natural Gas Pipeline Group.
KMI expects to generate excess cash sufficient to fund its growth capital needs without needing to access capital markets and, after taking into account efforts to improve the balance sheet, expects to end the year with a net debt-to-adjusted EBITDA ratio of approximately 5.3 times, below the budgeted ratio of 5.5 times. KMI's growth capital forecast for 2016 is approximately $2.8 billion, a reduction of $500 million from its budget of approximately $3.3 billion.
The overwhelming majority of cash generated by KMI is fee-based and therefore is not directly exposed to commodity prices. The primary area where KMI has commodity price sensitivity is in its CO2 segment, and KMI hedges the majority of its next 12 months of oil production to minimize this sensitivity.
Additionally, KMI continues to closely monitor counterparty exposure and obtain collateral when appropriate. However, the company has operations across a broad range of businesses and has a large customer base, with its average customer representing less than one-tenth of 1% of annual revenues.
About two-thirds of KMI's business is conducted with customers who are end-users of the products KMI transports and stores, such as utilities, local distribution companies, refineries and large integrated firms.
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NGL volumes were flat with the same period last year. Crude and condensate pipeline volumes were up 11% from the second quarter of 2015 primarily due to higher volumes on KMCC.
KMI reported stronger year-on-year earnings contributions from its Terminals, Products Pipelines and Canadian business segments in the second quarter, but it saw lower earnings from its CO2 and Natural Gas Pipelines divisions.
The Terminals segment experienced strong performance at KMI's liquids terminals, which comprise more than 75% of the segment's business.
Growth in the liquids business during the quarter versus the second quarter of 2015 was driven by various expansions across its network, including contributions from new operations at its Edmonton Rail, Galena Park, Pasadena and Deer Park Rail terminals.
Contributions from KMI's interest in the newly formed refined products terminals joint venture with BP, its Vopak terminals acquisition and the Jones Act tankers also contributed significantly to growth in this segment, Kean said. The Lone Star State and Magnolia State tankers were delivered in December 2015 and May 2016, respectively.
Growth from the liquids terminals was partially offset by a decline in the bulk terminals as compared to the same period in 2015. This reduction was driven by the bankruptcies of coal customers Arch Coal, Alpha Natural Resources and Peabody Energy, which had a negative year-over-year impact of approximately $19 million for the quarter.
Kinder Morgan Canada experienced high demand for capacity on the Trans Mountain pipeline system in the second quarter, with mainline throughput into Washington state up 25% from the same period last year. This was partially offset by an unfavorable foreign exchange rate, as the Canadian dollar declined in value against the U.S. dollar by approximately 5% since the second quarter of 2015.
KMI reported second-quarter net income available to common stockholders of $333 million, unchanged from the second quarter of 2015, and distributable cash flow of $1,050 million versus $1,095 million for the comparable period in 2015.
The decrease in distributable cash flow for the quarter was primarily attributable to lower contributions from the CO2 segment primarily due to lower commodity prices, higher preferred stock dividends and higher cash taxes, partially offset by increased contributions from the Products Pipelines and Terminals segments as well as lower interest expense.
Net income available to common stockholders was also impacted by a positive $31 million change in total certain items for the quarter from the second quarter of 2015, including a $39 million payment received for early termination of a customer storage contract in the Texas Intrastate Natural Gas Pipeline Group.
KMI expects to generate excess cash sufficient to fund its growth capital needs without needing to access capital markets and, after taking into account efforts to improve the balance sheet, expects to end the year with a net debt-to-adjusted EBITDA ratio of approximately 5.3 times, below the budgeted ratio of 5.5 times. KMI's growth capital forecast for 2016 is approximately $2.8 billion, a reduction of $500 million from its budget of approximately $3.3 billion.
The overwhelming majority of cash generated by KMI is fee-based and therefore is not directly exposed to commodity prices. The primary area where KMI has commodity price sensitivity is in its CO2 segment, and KMI hedges the majority of its next 12 months of oil production to minimize this sensitivity.
Additionally, KMI continues to closely monitor counterparty exposure and obtain collateral when appropriate. However, the company has operations across a broad range of businesses and has a large customer base, with its average customer representing less than one-tenth of 1% of annual revenues.
About two-thirds of KMI's business is conducted with customers who are end-users of the products KMI transports and stores, such as utilities, local distribution companies, refineries and large integrated firms.
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