Kinder Morgan, Inc.

Welcome to the quarterly earnings conference call. Today's call is being recorded. If you have any objections, you may disconnect at this time. All lines have been placed in a listen-only mode until the question and answer session of today's call. If you'd like to ask a question at that time, please press star 1, and please make sure your phone is unmuted and record your name and company name when prompted. I would now like to turn the call over to Mr. Rich Kinder. Thank you, sir. You may begin.

Okay, thank you, Missy. Before we begin, I'd like to remind you that, as usual, KMI's earnings released today in 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, to kick this off, the beginning of a new year, I believe, is a good time to stake to take stock of where KMI stands as an investment opportunity for its present and potential shareholders. Whether you look at the results for the fourth quarter of 2021, the full year 21, or our budget outlook for 2022, which we released in December, it's apparent that this company produces substantial cash flow under almost any circumstances. In my judgment, this is the bedrock for valuations because it gives us the ability to fund all our capital needs out of recurring cash flow. As I've stressed so many times, we can use that cash to maintain a solid balance sheet, invest in selected high return expansion capex opportunities, pay a very rewarding and growing dividend, and buy back shares on an opportunistic basis. But I believe there's more to the story than that. While we demonstrated by assets that we acquired during 2021 that we are participating meaningfully in the coming energy transition, it's also become apparent, particularly over the last several months, that this transition will be longer and more complicated than many originally expected. In short, there is a long runway for fossil fuels and especially natural gas. Investing in the energy sector has been very lucrative recently. with the energy sector the best performing sector of the S&P 500 during 2021. We expect that favorable view to continue in 2022, and the year has started out that way. Within the energy segment, I would argue that midstream pipelines are a good way of playing this trend. They generally have less volatility and less commodity exposure than upstream, and most have solid and growing cash flow underpinned by contracts to a large extent, with their shippers. We believe KMI is a particularly good fit for investors. We are living within our cash flow. We've paid down over $12 billion in debt since 2016, and 2022 marks the fifth consecutive year we have increased our dividend, growing it over those years from 50 cents per share to $1.11 per share. In addition to returning value to our shareholders through our dividends, Our board has approved a substantial opportunistic buyback program, which we have the financial firepower to execute on during this year if we so choose. Finally, this is a company run by shareholders, for shareholders, with our board and management owning about 13% of the company. I hope and trust you'll keep these factors I have mentioned in mind when making investment decisions about our stock over the coming year. More to come on all these subjects at our Investor Day conference next Wednesday. And with that, I'll turn it over to Steve.

Mr. Okay, thank you. I'll give you a brief look back on what we accomplished in 2021 and touch on capital allocation principles before turning it over to Kim and David, and then we'll take your questions. As is usually the case on this call, which comes the week before our Comprehensive Investor Conference, We'll defer to next week some of the more in-depth and detailed questions on the 2022 budget and the outlook and business opportunities. As to 2021, we wrapped up a record year financially. Much of that was due to our outperformance in Q1 as a result of the strong performance of our assets and our people during winter storm URIE. Putting URI aside, we were running a bit shy at plan in the full-year guidance that we were giving you through our quarterly updates. But by the end of the year, we closed the gap and met our EBITDA target, even excluding URI, but including the benefit of our Stagecoach acquisition. We also set ourselves up well for the future, getting off to a fast start in our energy transition ventures business with the acquisition of Conetrix, renewable natural gas business, and adding to our already largest in the industry gas storage asset portfolio with the acquisition of Stagecoach. Both of those acquisitions are outperforming our acquisition models. Third, as we'll cover in detail at next week's conference, our future looks strong. Our assets will be needed to meet growing energy needs around the world for a long time to come. And over the long term, we can use our assets to store and transport the energy commodities of tomorrow. And we have opportunities, as we have shown you, to enter into new energy transition opportunities at attractive returns. We're entering 2022 with a solid balance sheet, including the capacity to repurchase shares with well-positioned existing businesses and with an attractive set of capital projects. Our approach to capital allocation remains principled and consistent. First, take care of the balance sheet, which we have with our budget showing that debt to EBITDA of 4.3X. Then, invest in attractive return projects in businesses we know well at returns that are well in excess of our cost of capital. Our discretionary capital needs are running more in the $1 billion to $2 billion range annually, and at $1.3 billion, we're at the lower end of that range in our 2022 budget, not at the $2 billion to $3 billion that we experienced in the last decade. We're also generally seeing, or we're continuing to tilt, I guess I would say, toward generally smaller-sized projects that are built off of our existing network, and we can do those at very attractive returns and with less execution risk. The final step in the process is return the excess cash to shareholders in the form of an increasing and well-covered dividend, that's $1.11 for 2022, and in the form of share repurchases. As we said in our 2022 budget guidance release in December, we expect to have $750 million of balance sheet capacity for attractive opportunities, including opportunistic share repurchases. Given the current lower capital spending environment, we are now experiencing, we would expect to have the capacity to repurchase shares even if we add some investment opportunities as the year proceeds in the form of additional projects, et cetera. As we've always emphasized when discussing repurchases, we will be opportunistic, not programmatic. We believe the winners in our sector will have strong balance sheets, invest wisely in new opportunities to add to the value of the firm, have low-cost operations that are safe and environmentally sound, and the ability to get things done in difficult circumstances. We're proud of our team and our culture, and as always, we will evolve to meet the challenges and opportunities in the years ahead. With that, I'll turn it over to Kim.