Kinder Morgan, Inc.

Welcome to the quarterly earnings conference call. At this time, all participants are in a listen-only mode until the question and answer session of today's conference. At that 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.

Thank you, Denise. As usual, before we begin, I'd like to remind you that KMI's earnings release today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange 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. Now, as I always do on these calls, let me talk briefly about our financial strategy at Kinder Morgan. To say that these are unprecedented times for the American economy is an understatement, and particularly for the energy business. We face the continued impact of COVID-19, together with the negative effect that virus has had on worldwide demand for most of the products we move through our pipelines and handle at our terminals. So the question is, what should our financial strategy be in the face of these black swan events? Actually, in our judgment, the response is pretty similar to the approach we've been using for the last few years. We will continue to prioritize returning value to our shareholders while maintaining a solid investment-grade balance sheet. Specific to our balance sheet, we are fortunate to have paid down approximately $10 billion in debt since 2015. We are also fortunate to have assets that throw off substantial cash flow, even under adverse circumstances. We need to live within that cash flow by funding all dividends and expansion capex from these internally generated funds. We're doing that today and expect to accumulate cash in excess of our dividends and our capex even in the challenging year of 2020. As previously announced, we reduced our expected expansion budget by about 30% this year, and are also reducing our operating expenses and sustaining capex, which Steve and Kim will talk about in just a few minutes. We've raised our dividend payout and expect to do more in that regard when normal economic conditions return. Looking beyond 2020, we believe we are operating in a maturing business segment and that our opportunities for viable expansion projects will likely be significantly less than we have experienced over the last several years. If that expectation proves accurate, it will probably reduce our growth potential but allow us to husband significant cash flow that we can use to increase our dividend, pay down debt, and or buy back shares under the right conditions. Our goal is to be disciplined in every respect. That means being very careful in high grading potential capital expansion expenditures and keeping a focus on operating our assets in the most efficient way possible. Now, most investors we talk with, whether generally positive or not on the KMI story, believe that given our size, attractive assets, and relatively strong balance sheet, we will be a long-term survivor. With that in view, they see us as a potential consolidator in the midstream area. Let me say that while we would never rule out a potential M&A transaction, we will not undertake such action to the detriment of our balance sheet. Beyond that, it would have to be accretive to our distributable cash flow. One final thought. In unsettled times like these, the famous quote of Mark Twain comes to mind. He said, it's difficult to make predictions, particularly about the future. That said, I believe in this kind of environment, staying power and maintaining a long-term outlook are keys to long-term success and the delivery of real value to our shareholders. 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 situation. I'll give you an update on our Permian Highway Pipeline project. I'll also provide some color on the organizational announcement that we're making today. Then I'll turn it over to Kim Dang to cover the outlook and segment updates. And then our CFO, David Michaels, will take you through the financials. Then we'll take your questions. In times like these, it's especially important for us to keep our priorities and principles in mind. Our priorities are throughout the COVID response has been to keep our employees safe and 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 for our offices and that's worked astonishingly well. We also made changes in our field operations to enable our coworkers to do their work while maintaining appropriate physical distance. In a few cases, we're distancing was not possible, we enhanced our PPE requirements. It's working, all of our assets are running, and we're keeping our coworkers safe while they are at work. Community spread has continued, and it's affecting us, particularly in our Houston area locations, but telecommuting and the other precautions we are taking have allowed us to maintain effective, safe, reliable operations while largely keeping our coworkers from contracting or spreading the virus while at work. Our financial principles remain the same. First, maintaining a strong balance sheet. 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 $660 million from our 2020 budget in response to the changing conditions in our markets. We still have over $1.7 billion of expansion capital in 2020 on good project investments, and a backlog of $2.9 billion, 71% of which is in natural gas. We're also maintaining cost discipline. We now stand at nearly $170 million of expense and sustaining capital cost savings for 2020, including deferrals, up from $125 that we reported to you in April. The result of this work on our capital budget and our costs is that our projected DCF lets the Discretionary capital spend is actually improved versus our plan, notwithstanding the pandemic and notwithstanding the degradation to our forecast, with more than offset the degradation to our forecast with spending cuts in 2020. Finally, we are returning value to shareholders with the 5% year-over-year dividend increase to $1.05 annualized, providing an increased but well-covered dividend. Strong balance sheet, capital and cost discipline, and returning value to shareholders. Those are the principles we continue to operate by. We continue to make very good progress on our Permian Highway Pipeline project, which is supported by long-term contracts with a take-or-pay structure. Construction is proceeding very well, and we are now nearly 80% mechanically complete on the pipeline, actually 79% as of this morning, and we're 97% complete on our mainline compression. We still expect to be fully in service in early 2021. Permitting delays pre-construction and some additional land acquisition and river crossing costs have impacted returns, but we are still looking at a strong, double-digit, unlevered after-tax return on this project. Our team has continued to overcome obstacles, and the number of remaining obstacles has shrunk considerably, particularly in light of the Supreme Court decision to stay the injunction against the Army Corps' nationwide Rule 12 permitting process. but also as a result of adjustments the team has made in routing and construction. The other topic I want to touch on is the organizational changes that we made today. James Holland has been appointed chief operating officer reporting to Kim. James has a long successful history at Kinder Morgan, including most recently as president of our products pipeline group. We asked James to take on the leadership of our ongoing ESG and operational excellence initiatives. Also, we have asked James to lead our examination of cost-effective changes in our organizational structure. Our management team is in the midst of an effort to determine how we operate and is considering centralizing certain functions in order to be more efficient and effective. We are already an efficient and lean organization, but we are always looking to do better, especially in today's challenging environment. We believe that cost-effectiveness is one of the keys to long-term success in our sector. It's essential to be cost-effective while also maintaining our commitment to safe and compliant operations. That's embedded in our values, our culture, and in how we put the budget together. The management team is committed to these objectives, and James will help make sure that we meet them. We expect to conclude this review concurrent with the preparation of our 2021 budget. We also announced Dax Sanders will take over as president of our products pipeline group. Dax has had a long successful career here too, has been first chair on our acquisition and divestiture activity for over the last seven years. More than being the corporate development guy though, Dax has also been a key player in every significant strategic decision we have made. Now he will bring his skills and experience to bear on leading a business unit and working with a great team in our products pipeline segment. Kevin Grauman will take over DAX's role in corporate development, and he will do a great job. We won't miss a beat. And with that, I'll turn it over to Kim.