Kinder Morgan, Inc.

Welcome to the Quarterly Earnings Conference call. At this time, all parties are in a listen-only mode until the question and answer session of today's conference. At any time, you may press star 1 on your phone to ask a question. I would like to inform all parties that today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mr. Rich Kinder, Executive Chairman of Kinder Morgan. Thank you. You may begin.

Thank you, Denise. Before we begin, I'd like to remind you, as I always do, that KMI's earnings released today and this call include forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995 and the Securities Act of 1934, as well as certain non-GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosures on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release, as well as review our latest filings with the SEC for important material assumptions, expectations, and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. As I always do on these calls, let me talk briefly about our financial strategy at Kinder Morgan with specific focus on our dividend policy. Ours is a conservative philosophy, and we believe that is appropriate, particularly in our industry and especially in these unprecedented times. As Steve, Kim, and the team will describe, while we faced headwinds, we are addressing our challenges. Our cash flow remains strong, even in this environment. We are covering our dividend and all expansion capex from that cash flow. Now, let me talk about our dividend. July 2017, when we were paying an annual dividend of 50 cents, we said we expected to increase that dividend 80 cents in 2018 to $1 in 2019 to $1.25 in 2020. Met those expectations in both 2018 and 2019, and we have the financial wherewithal to meet the $1.25 target in 2020. with significant coverage. That said, in unprecedented times like these, the wise choice in the opinion of our management and our board is to preserve flexibility and balance sheet capacity. Consequently, we are not increasing the dividend to the $1.25 we projected under four different circumstances in 2017. Nevertheless, as a sign of our confidence in the strength of our business, and the security of our cash flows, we are increasing the dividend to $1.05 annualized, a 5% increase. In doing so, we believe we have struck the proper balance between maintaining balance sheet strength and returning value to our shareholders, which remains a primary objective of our company. We remain committed to increasing the dividend to $1.25 annualized. Assuming a return to normal economic activity, We would expect to make that determination when the board meets in January 2021 to determine the dividend for the fourth quarter of 2020. And with that, I'll turn it over to Steve.

All right. Thanks, Rich. I'll give you an overview of our business, including the coronavirus response and impacts, and turn it over to our President, Kim Dang, to cover the outlook and the segment updates. Our CFO, David Michaels, will take you through the financials, and then we'll take your questions as usual. I'll begin on a grateful note. I'm glad that we strengthened our balance sheet, reducing debt by about $10 billion since the third quarter of 2015. I'm grateful we completed the KML sale in December of 2019 and converted the proceeds to cash at an attractive time. I'm glad we hedged crude early in the year. I'm glad that we have a disciplined approach to capital investment and that we operate with a business model that insulates us from some of the worst of the current double impact on energy markets right now. I'm grateful for the way we run our business and for the culture of our workforce. All of these things have made us strong for the current storm. In times like these, it's especially important to keep your priorities and principles in mind. Our priorities are, number one, to keep our employees safe, and two, to keep our businesses running. We operate infrastructure that is essential to businesses and communities across the country. We need to keep our assets running, and we have. To protect our employees, we instituted telecommuting, which has worked astonishingly well, by the way, and made changes in our field operations to enable our coworkers to do their work while maintaining appropriate physical distance. In the few cases where distancing is not possible, we are enhancing our PPE requirements. It's working. All of our assets are running, and we are keeping our coworkers safe. Our financial principles remain the same. First, maintaining a strong balance sheet. Even with our revised estimate, we are consistent with our approximately 4.5 times debt to EBITDA target. We believe the dividend decision made today was a wise one. Second, we are maintaining our capital discipline through our return criteria, a good track record of execution, and by self-funding our investments. On that front, we evaluated all of our 2020 expansion capital projects and reduced CapEx by about $700 million for 2020, or 30%. in response to the changing conditions in our markets. We still have $1.7 billion of expansion capital in 2020 on good project investments. Finally, we are returning value to our shareholders with a 5% year-over-year dividend increase to $1.05 annualized and the commitment to get to $1.25 when market conditions recover. As Rich said, we think that holding off on a larger increase now and leaving our balance sheet stronger but still showing an increase in our dividend strikes the right balance. strong balance sheet, capital discipline, and returning value to shareholders. Those are the principles we operate by even in or perhaps especially in times like these. Here's what we're seeing in our businesses. Natural gas transportation and storage remains relatively strong, and transport volumes are up year over year. Over time, we're going to see some shifting from associated gas to dry gas, but we have assets that serve both. Refined products volumes are coming down in a way we've never seen before. This impacts us in several ways. Refined products pipelines are common carrier pipelines, so we get paid a fee on the actual throughput. Historically, throughput varied only slightly, usually growing a percent or so a year. Lower throughput translates into lower revenues until we start to see recovery in the economy. In our terminals business, most of our revenue comes from MWCs, monthly warehouse charges, but ancillary services, blending for example, are more throughput driven, so we see some deterioration there. This is partially offset by increased demand for previously unleashed capacity. Almost every tank we have is now under contract. On refined products volume specifically, we believe this is not a permanent change. It's temporary. There are all kinds of views about how long is temporary and when we will get to the other side, but we will get there. Our gathering and processing assets will be negatively impacted by reduced producer activity. We are seeing increased interest, however, in our Hainesville assets, but that will take some time to ramp up. Overall, reduced producer activity negatively impacts this part of our business. As a reminder, gathering and processing, when you put the gas portion of it together with the products portion, is only about 10% of our budgeted segment EBDA. Finally, in our CO2 business, commodity prices are an obvious negative. However, we did a lot of hedging early in the year, and as you can see in the updated sensitivities page that we included in this quarter's earnings package, our exposure to oil price changes is reduced going forward. We're focused on our free cash flow, and our capital reductions for 2020 in this segment are expected to offset the distributable cash flow decline for 2020 in this segment. The outlook numbers Kim will take you through are based on a bottoms-up reforecast we worked on with each of our business units and corporate staff. That review focused on margin impacts and cost savings opportunities. We also fully reviewed our capital expenditures, as I mentioned. It's challenging to give guidance in uncertain times like these. We think we address that challenge by giving you our estimate and also giving you estimated sensitivities. And with that, I'll turn it over to Kim.