Kinder Morgan, Inc.

Welcome to the quarterly earnings conference call. At this time, all participants are in a listen-only mode. During the Q&A session, if you'd like to ask a question, please press star 1 on your phone. Today's call is being recorded. If you have any objections, please disconnect at this time. I'll now turn the call over to Rich Kinder, Executive Chairman of Kinder Morgan.

Thank you, Ted. And before we begin, as we always do, 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 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 that are 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. An analyst recently described Kinder Morgan as a capital-efficient business model leveraged to natural gas infrastructure growth. I largely agree with that assessment, although it omits our significant steps in our energy transition efforts, including renewable natural gas, renewable and potentially carbon capture and sequestration. I spent the last several quarters on this call describing that capital efficient business model, and today I want to spend a bit of time discussing natural gas infrastructure and the value of our existing infrastructure in today's environment. As we all know, it's become increasingly difficult to build new greenfield pipeline projects, particularly in the Northeast and other areas outside the U.S. Gulf Coast. While this situation is, in my opinion, unfortunate and poor public policy, it does make existing infrastructure even more valuable. I don't think that value is fully recognized by the equity markets. The difficulty in building new pipeline and ancillary facilities widens the moat, to use Warren Buffett's phrase, around existing assets at a company like KMI. That's an obvious source of additional value. But beyond that, having such an extensive network already in place affords great opportunity for a company like ours to extend and expand our assets on an incremental basis without the Herculean task of permitting and building a new greenfield project. Those step-out projects can provide great service to our customers and yield a very good return for our shareholders. We're fortunate at KMI that a large portion of our network is in Texas and Louisiana, states that understand and appreciate the need for new energy infrastructure and where so much of the demand for additional throughput, particularly natural gas, is located. Let me be more specific. The demand for natural gas in those states is projected to grow enormously over the rest of this decade. That growth is driven by a number of end uses, but let me just focus on LNG export facilities. Year-to-date in 2022, LNG is consuming over 11 BCF a day, and that number incorporates the absence of roughly 2 BCF a day of demand from the Freeport facility, which has been shut down since June. According to the S&P Global LNG forecast, that number is predicted to grow to 22 BCF a day by 2027 as new facilities come online. That's virtually doubling the current demand. which has already grown by 400% in the last five years. We project that after 27, LNG demand will continue to grow and expected to be 28 VCF a day by 2030. Given the situation in Europe today, which will result in more long-term contracts and the continuing usage in Asia, this hyper growth scenario actually seems pretty reasonable to me. That's a huge increase and most of it will occur in Texas and Louisiana where so much of our asset base is located. That is what we in the pipeline business call a demand pull, which in many respects is more valuable than a supply push. As you know, we currently move about 50% of all the gas consumed by LNG facilities, and we expect to maintain or expand that share in the future. To serve our customers, both producers and end users, we are continuously expanding our system on an incremental basis to accommodate the growth we expect. Just a couple of examples of that effort include the expansion of our PHP system that connects the Permian Basin to the Gulf Coast and the building of the Evangeline Pass system to serve the venture capital LNG facility in Plaquemine Parish, Louisiana. And we expect to announce additional projects in the coming months. When you add the increasing need for natural gas for industrial uses, electric generation, and exports to Mexico to that massive LNG demand, The result is an enormous opportunity to grow our system in a capital-efficient manner, which in turn will grow the value of our company.

Steve? Yes, thanks, Rich. We are having a good year. We are projected to be nicely above plan for the year and substantially better year over year, Q3 to Q3, as Kim and David will show you. Some of the outperformance is commodity price tailwinds, but we're also up on commercial and operational performance. Just a couple of highlights. Our capacity sales and renewals in our gas business are strong. Gathering and processing is also up versus plan and up year over year. Existing capacity is growing in value on our natural gas network, and we're seeing it across our network on our major interstate systems and on our Texas intrastate system. And we are seeing it in both storage and transportation service offerings. And we're even seeing it on a previously challenged system, the Mid-Continent Express pipeline. In CO2, SACROC production is well above plan. Of course, we are benefiting from higher commodity prices in this segment, though prices are not as elevated as they were when we talked after Q2. We are facing cost headwinds, mostly because of added work this year. But while costs are up, we're actually doing very well in holding back the impacts of inflation. It's hard to measure precisely, but based on our analysis of what we can reliably track, we are well below the headline PPI numbers that you're seeing. Actually, we appear to be experiencing about half of that increase. Much good work by our procurement and operations teams, and much of this good performance is attributable to our culture. We are frugal with our investors' money. Looking ahead, we are seeing good opportunities across our network, and in gas in particular, Rich emphasized LNG, and that is clearly the biggest long-term opportunity, and our network is especially well-positioned. I'll give you an illustration of that. We currently have 5.7 BCF a day under long-term contracts serving existing LNG facilities. The associated investment for that 5.7 BCF was $1.3 billion. That is very capital-efficient expansion of our network. There are other opportunities as well. We have identified and talked to customers on our Texas intrastate system about over a BCF a day each of power plant, industrial, and utility expansions. Of course, not all that's going to happen, but it shows the level of economic activity in one of our biggest natural gas markets. We now have a backlog of $2.7 billion of projects. That's up $600 billion on a net basis since last quarter, meaning taking into account the projects have rolled into service over the quarter. And almost 80% of that backlog is in low carbon investments, natural gas, energy transition ventures, and renewable diesel and renewable feedstocks projects in our products and terminals businesses. On energy transition ventures, we expect with what we have already acquired and with the projects under construction or development right now to invest about $1.2 billion at an EBITDA multiple of a little over five times when everything is up and running. I'll add that while we have experienced some delay and modest cost increases in this business, the returns are very good and the EBITDA multiple is strong. We also closed on the sale of an interest in our ELBA liquefaction facility during the quarter. The implied enterprise value to EBITDA multiple of the sale was approximately 13 times. And so to think about in terms of use of proceeds, that compares very favorably to our expansion project multiple of 5.5 times in aggregate over the last three years, as well as to our share price multiple. Again, we're having a very good year, and we are setting our business up well for the future. Our balance sheet is strong. We are seeing good value, particularly in natural gas and renewables. We are finding and executing on projects with attractive returns, and we are returning value to shareholders. and I'll turn it over to Kim. Okay.