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spk16: 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, you may 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 Mr. Rich Kinder, Executive Chairman of Kinder Morgan. Sir, you may begin.
spk01: Thank you, Ted. And as usual, before we begin, I'd like to remind you that 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. As we begin 2023, it seems to be an appropriate time to look both backward and forward. Through the rearview mirror of today's earnings release, we see that 2022 was a very good year for Kendra Morgan. We again produce strong cash flow well in excess of our budget and use that cash flow to pay our investors a healthy and growing dividend, fund our expansion CapEx, maintain a strong balance sheet, and buy back shares on an opportunistic basis. In short, we are continuing to follow the financial philosophy that we have stressed for years. Looking forward, we released in December our preliminary budget for 2023 and it shows another year of living within our means, even in the light of increased interest costs and an expanded set of expansion CapEx opportunities, which should drive nice growth in 2024 and beyond. We also announced today our plan for management succession. Our CEO, Steve Cain, will transition out of his role, effective on August 1st of this year. Let me just say that Steve has been a superb CEO for the last eight years, and we thank him for the dedication, the hard work, competence, and honesty he's brought to this job. On a personal note, he's been a real pleasure to work with during all his years at the company. While we will be sorry to lose him as CEO, we are delighted that we have him in his present role until August, and that thereafter he will continue to be a director, and I know he will contribute in that role to the future success of the company. The board and I have great faith in Kim Dank, who will transition from her present role as president into the CEO slot, and then Tom Morton, who will succeed her as president. Both have been with Kinder Morgan for approximately 20 years, have made extraordinary contributions to our results and culture, and we expect great things from them in the future. To sum it up, we expect a smooth transition later this year. Steve?
spk09: Thank you, Rich. I'll give you a brief look back at what we did in 2022 and how well we have set ourselves up for the future. Kim and David will cover the substance and the details of our performance, and then we'll take your questions. Next week, we have our comprehensive annual investor conference. So as usually is the case on this call, we'll defer to next week the more detailed questions on the 2023 budget and the outlook and business unit performance. As Rich said, we had a very strong year in 2022 and wrapped it up with a great fourth quarter. Late in the fourth quarter, for example, we saw some volatility in the gas market, and that creates opportunity for large transmission and storage operators like us and for our customers who procure transportation and storage services from us. We performed well operationally for our customers, financially for our company, thanks as always to the tireless preparation and execution of our commercial, logistics, and operations teams. We saw that come through especially during the holiday weekend when our teams worked seamlessly across organizational lines to prepare, respond, and recover, and deal with the upsets along the way. That requires a committed workforce and a strong culture, and we've got that at Kinder Morgan. Our work in 2022 also set us up well for the future. We added to the strength of our balance sheet, finishing the year at 4.1 times debt to EBITDA, better than our 4.3x budget for the year and well inside our long-term target of approximately 4.5 times. We originated new business, which has grown our backlog to 3.3 billion, made up of high probability projects at an extremely attractive EBITDA multiple of about 3.4 times. These investments are weighted toward our lower carbon future in natural gas, renewable liquid feedstocks and fuels in our products and terminals businesses and investments in our energy transition ventures business. And these lower carbon investments are all expected to yield very attractive returns well above our cost of capital. That's how we told our investors we would approach these opportunities and that's exactly what we are doing. There are no loss leaders here. We also return value to shareholders in the form of a well-covered modestly growing dividend, and additional share repurchases. For 2022 alone, we've returned nearly $2.9 billion to shareholders in declared dividends and share repurchases. On the share repurchases, we have used a little under $1 billion of the Board authorized amount, and the Board has now upsized the total authorization from $2 to $3 billion. Those will be opportunistic repurchases when we use that capacity. Also, as we talked about throughout the year, we're starting to see nice uplifts on our base business, on renewals in our natural gas business and built-in escalators in some of our products and terminals, tariffs and contracts. We are putting behind us the contract roll-off headwinds in our gas group. Bottom line for investors, what we do today will be needed for decades to come. and as we are demonstrating in our products and terminals businesses, the assets we have today can accommodate the energy forms of the future. We are making the gradual pivot that the gradual energy evolution dictates, and we're doing it at attractive returns for our investors. With the cash our businesses generate, we're maintaining that strong balance sheet. We are investing in projects at good returns, which adds to the value of the company, and we are returning the excess to our shareholders in the form of dividends and opportunistic share repurchases. We all appreciate Rich's comments at the beginning. I'm grateful to Rich and the board for their support and confidence in us. I'm grateful to my 10,000 colleagues here who I've been proud to come to work with every day. And I'm grateful to you on the call who I've interacted with over the years. I learned from you and benefited from your questions and perhaps your occasional criticisms and your ideas. Thank you. As you'll hear more about next week, we have our balance sheet in strong shape. We have a bright future with rich opportunities before us. And most importantly, we have a great, experienced leadership team around this table who are always ready to step up, and all of our investors benefit from that. We look forward to seeing you in person at the conference next week. Kim.
spk12: Thanks, Steve. Okay, I'm going to start with our natural gas business unit. Transport volumes on our natural gas pipelines increased by about 4% for the quarter versus the fourth quarter of 21. We saw increased volumes from power demand and LDCs as a result of weather and coal retirement and that was somewhat offset by reduced LNG volumes due to the Freeport outage and exports to Mexico as a result of third party pipeline capacity added to the market. Physical delivery to LNG facilities off of our pipes averaged approximately 5.4 million decatherms per day. That's down about 450,000 decatherms per day versus Q4 of 21, and that's due to the Freeport outage and somewhat offset by increased deliveries just being passed. If we adjusted for the Freeport outage, LNG volumes would have increased approximately 5%. Deliveries to power plants and LDCs were robust in the quarter, up approximately 7% and 13% respectively, driven by the weather. Our natural gas gathering volumes were up 6% in the quarter, driven by Hainesville volumes, which were up 44%. Sequentially, volumes were flat. In our product segment, refined product volumes were down a little under 1% for the quarter, slightly outperforming the EIA, which was down 2%. Road fuels were down 3%, but we saw a 10% increase in jet fuel demand. Crude and condensate volumes were down 6% in the quarter due to lower Bakken volumes. Sequential volumes were down about 3%, and that was driven by lower double H volumes. That's a pipe coming out of the Bakken due to unattractive locational pricing differentials. In our terminals business segment, our liquids utilization percentage, think about that as a percentage of our tank capacity contracted, remains high at 93%. Excluding tanks out of service for required inspection, utilization is approximately 96%. Rates on liquids tanks renewals in Houston and New York Harbor were slightly lower in the quarter. Our tankers business was up nicely in the quarter as we benefited from both higher rates and higher utilization. On the bulk side, overall volumes were down 2%. We saw increases in petco and coal volumes, but that was more than offset by lower steel volumes. And our CO2 segment prices were up across the board. On the volume side, oil production was flat, but it's up 8% versus our budget. CO2 volumes were up 12%. MGL volumes, which are much less impactful to results, were down 4%. Overall, both Steve and Rich have said we had a fantastic quarter and year. For the quarter, DCF per share was up 13% and for the full year it was up 14% when you exclude the impact of winter storm URI. We exceeded our full year plan DCF and EBITDA by 5% and DCF per share by 6%. Coming in at or slightly above the numbers we have given you in the interim quarters. This is an amazing year for a stable fee-based cash flow company like Kinder Morgan. For sure, we benefited from higher commodity prices, but our underlying business, especially natural gas, performed incredibly, and the fundamentals look strong for the future, which we will cover with you next week at the investor conference. With that, I'll turn it over to David. All right. Thanks, Kim.
spk15: So for the fourth quarter of 2022, we're declaring a dividend of 27.75 cents per share, which is $1.11 per share annualized, and up 3% from our 21 dividend. I'll start with a few highlights on leverage, liquidity, growth, and shareholder value. There's some repetition here with earlier comments, but it's worth it. On leverage, we ended 2022 with the lowest year-end net debt level since our 2014 consolidation transaction. And we have plenty of cushion under our leverage target of around 4.5 times. For liquidity, we ended 2022 with $745 million of cash on our balance sheet, in addition to our undrawn $4 billion worth of revolver capacity. Growth for full year 2022 versus 21, excluding the impacts from winter storm Yuri, as Kim mentioned, we grew nicely. On net income basis, we were up almost three times 2021. That's partially due to an impairment taken in 2021. And on EBITDA, we were up 10%. And on DCF per share, we were up 14% year over year. Very nice growth. For shareholder value for full year 2022, we repurchased 21.7 million shares at an average price of $16.94 per share. And our board just authorized us to do more of that should the opportunity present itself. We're seeing healthy growth across our business. Our balance sheet and liquidity are as strong as they ever have been. And we're creating shareholder value across the company in multiple ways. So moving on to our quarterly performance. In the fourth quarter, we generated revenue of $4.6 billion, up $154 million from the fourth quarter of 2021. Our net income was up was $670 million, up 5% from the fourth quarter of last year. And our adjusted earnings, which exclude certain items, was up 16% compared to the fourth quarter of 21. Our distributable cash flow performance was also very strong. Our natural gas segment was up 11%, or $138 million, with growth coming from multiple assets. Higher contributions from our Texas interest rate systems MEP and EPNG increased volumes on our Kinderhawk system and favorable pricing on our Altamont system. Those were partially offset by lower contributions from our South Texas gathering assets. The product segment was down $29 million driven by higher operating expenses as well as lower contributions from our crude and condensate business, and those were partially offset by increased rates across multiple assets as well as strong volumes on our splitter system. The terminal segment was flat to the fourth quarter of 2021 with slightly lower New York Harbor and Houston Ship Channel liquids refined product renewal rates, unfavorable impacts from the 2022 winter weather, and unfavorable property taxes offset by greater contributions from our Jones Act tanker business non-recurring impacts from Hurricane Ida in 2021, and contributions from expansion projects placed in service, as well as other rate escalations that the segment experienced. Our CO2 segment is up $36 million from the fourth quarter of 21, driven mostly by favorable commodity prices. Our EBITDA was $1.957 billion, up 8% from last year, and DCF was $1.217 billion up 11% from last year. Our GCF per share of 54 cents was up 13% from last year. Moving on to the balance sheet, we ended the fourth quarter with $30,900,000,000 of net debt and a net debt to adjusted EBITDA ratio of 4.1 times. That's up from 3.9 times from year end 21 but that's due to the non-recurring EBITDA contribution from winter storm URI we experienced in 2021. Excluding the winter storm URI EBITDA contribution, that year-end 2021 ratio was 4.6 times. So we ended the quarter and year nicely favorable to the metric, excluding the URI contribution. We're also nicely below our long-term leverage target of around 4.5 times. Our net debt change for the full year of $278 million was driven by a number of things, so here's a high-level reconciliation of that. Our DCF generated $4.97 billion. We paid out $2.46 billion in dividends. We spent $1.1 billion on growth capital and JV contributions. We repurchased stock in the amount of $368 million. We made two renewable natural gas acquisitions for around $500 million, and we received $560 million approximately from the sale of a partial interest in our elbow liquefaction company. Finally, we had a working capital use of around $825 million from several items, and that gets you close to the $278 million reduction in net debt year-to-date.
spk12: Okay, before we start on the questions, I am very excited about the opportunity ahead. A large part of my job is going to be about continuity. This is a great company and great business with a great future. As Steve said, our traditional business will be around for a long time to come. Energy is a $5 trillion global industry that is ingrained into every aspect of our lives. We'll continue to invest wisely in it as we position the company to turn slowly over time with the transition in a profitable manner. I'm also excited to work more directly with Tom. We work well together and have complimentary skills which will help the company into the future. We have an experienced, cohesive senior management team with Dax and John and Anthony and Cecil and David and Kevin and others sitting around this table, and we expect to make this a seamless transition.
spk09: All right. Okay, Ted, let's open it up for questions. And as usual, we have a good chunk of our senior management team around the table. We'll make sure that you get a chance to hear from them as you have questions about their businesses specifically. So, Ted, if you would open it up to questions.
spk16: Yes, the phone lines are now open for questions. If you would like to ask a question over the phone, please press star 1 and record your name. To withdraw your question, press star 2. The first question in the queue is from Jeremy Tenet with JP Morgan. Your line is now open.
spk13: Hey, good afternoon. Just wanted to say congratulations to everyone and Steve, best of luck going forward. And maybe just starting off, I guess, with capital allocation, wondering if we could touch on any updated thoughts there. It seems like the dividend uptake might have been a little bit less than we expected, and then at the same time, the share authorization levels were increased when it wasn't fully utilized before. So just wondering, is this signaling any kind of shift in capital allocation or any other thoughts there on return of capital?
spk09: Yeah, I'll start. I mean, it doesn't imply any shift or change in approach at all. We look to maintain the strong balance sheet, as all four of us have said. And we look to fund projects at attractive returns. And as mentioned, we have We have some very good ones, $3.3 billion at a 3.4x EBITDA multiple. Those add to the value of the firm. Those are attractive returns to us. But then we produce cash beyond that, and that cash gets returned to shareholders in the form of a modestly growing and well-covered dividend and share repurchases. The reason for upsizing the capacity is not a change in terms of how we're thinking about it, opportunistic as we've all said and we've been saying for a long time. But we've used about $900 million since the original authorization, a little over $900 million. And so we'll be ready to take advantage of opportunities. We upsize the author, the board upsize the authorization. And so we're in position to take advantage of opportunities as they arise. But overall, bottom line, We haven't changed our capital allocation philosophy. It's worked. It's been the same for quite a while and it adds value for our shareholders.
spk12: Yeah. And on the dividend, what I would say is that, you know, it's important. We believe it's important to increase the dividend, um, when the company is, is growing and, um, you know, but we do, we are one of the top 10 dividend yields and the S and P 500. Um, and so we already have an attractive yield on this stock. And so it's, you know, a small increase so that we continue to increase in terms of being a good dividend-paying stock, but also recognizing where the yield on the stock is.
spk13: Got it. Makes sense. That's helpful there. And then just want to shift to the weather impact during the quarter. If maybe you could unpack that a little bit more as far as pros and cons. Were there any marketing uplifts during the quarter? Just trying to see, I guess, what was the impact from the storm in the quarter?
spk09: Yeah, so look, we had uplift primarily in our natural gas assets, and that's attributable to what I said at the beginning, which is that when you have storage and transport capacity, particularly in this case, storage, where, Kim, I think the peak was 160 BCF, and we had some supply degradation. This is a nationwide look down to a little over 80 BCF. The difference had to be made up with storage, and people who had those assets and had the capability to were able to do well in those. The net, though, we did have some operational upsets, some repairs we had to make, et cetera. And so we netted those out. And the storm itself is not a huge incremental contributor, but it's on the order of $20 million or so when you net everything. But I think just overall, experiencing the winter weather and the volatility that occurred in pricing both before and after that winter event, if you have storage and transport, you're able to take advantage of that, and we did.
spk13: Got it. That's helpful. And congrats to everyone again.
spk16: Next question in the queue is from John McCarthy with Goldman Sachs. Your line is open.
spk06: Hey, everyone. Thank you for the time. Appreciate it. I wanted to talk maybe just a little more on some of the regional gas movements on the gathering side. You just touched again on I think, Kim, you mentioned Hainesville volumes were flat quarter over quarter. Just wondering if you could comment on if that's producer-driven or takeaway issues, and then anything else you can share maybe on what you're seeing across the Rockies in terms of production. Thanks.
spk11: So, yes, the Kinderhawk volumes were basically flat from quarter to quarter, but we do expect a nice uplift as we move into 2023, and that is It is largely capacity constraints, both on our gathering system. We're spending some capital in 2023 to create some additional capability there. And then also as downstream capacity comes online as well. So we see some really nice opportunities to continue to grow on Kinderhawk and in the Haynesville play overall. And that's not limited to just are gathering and processing opportunities, but we also see some nice interstate rate increase and utilization opportunities as we go forward. So, yes, a nice story. Hainesville's a nice story for us. And then as far as the Rockies, I mean, yeah, there's, you know, we're not seeing a whole lot of growth there. There's a few pockets of green shoots in the DJ, but overall, You know, we're not seeing a great deal of growth there, although on our Ultima gathering system, we certainly, the Uinta, we're seeing some nice growth there and expect that to grow as we go into 2023 as well.
spk06: Great. Thanks for that. Maybe just shifting gears to the Red Cedar announcement. Curious on how much else could be out there in terms of, you know, shifting away from, I guess, what's called natural CO2 sources to kind of recovered CO2? I mean, how much of the mix of your overall CO2 kind of EOR business, either your own or selling to third parties, could these recoveries end up making up over time?
spk04: Yeah, so the Red Cedar deal that we're talking about, that's up to 20 a day. Put it into context, you know, where... We're currently moving over 900 a day down our Cortez pipeline to West Texas. And so there's a ways to go before effectively that those natural resources get replaced. Really, when you're talking about opportunities around kind of the Permian and the infrastructure there, that's largely gas processing assets, which are going to be lower. And so with regards to, I guess, replacement of our existing source capacity, it would be a very long time before that would be replaced.
spk06: All right. We'll save the good ones for next week. Thanks for your time, and congrats, everyone, on the new roles.
spk16: Next question is from Jean Ann Salisbury with Bernstein. Your line is now open.
spk10: Hi. Can you remind us where Kinder Morgan is on rate case settlements? Which ones have been settled and are incorporated into 2023 guidance? And which pipes, if any, could still see rate cases this year or next?
spk11: Really, we're past the big ones for now. I mean, we've got, you know, NGPL, EPNG. Those are the big ones on all the Rockies pipes. And I'm saying this over the context of the last year Those are the big ones that have been addressed, and so we're pretty clear now for 2023, and that's all been baked into our budget for 2023. Okay. Thank you.
spk10: And then what's the latest on El Paso Restart? I think you had a release that noted some positive progress last week.
spk09: Yes. You know, our information on this is going to be consistent with and stick closely with what we post on the EPNG electronic bulletin board. And so we did post an update there and what it says is that we anticipate completing the physical work on line 2000 before the end of January and then we will submit a request to PHMSA on behalf of EPNG to lift the pressure restriction and return to normal commercial service. So PHMSA will need time to review the information that we provide, but our work we expect to be completed by month end.
spk10: Great. That's all for me, and congrats to you, Kim, and thank you, Steve, for all the time and thoughtful answers over the years. Best of luck.
spk11: Thank you.
spk16: Next question is from Spiro Dunas with Citi. Your line is now open.
spk02: Thanks, Operator. Good afternoon, everybody. Congrats all around. And, Steve, I can't believe you're willing to walk away from the dollar a year salary. It must have been a tough decision to make.
spk00: It was a hard choice.
spk02: Congrats, though. Two-part question on my first one here, just along the Permian pipeline. First part, just between GCX and Permian Pass, Curious if one of those is kind of in the front of the queue and if maybe it would make more sense to kind of bring Permian Pass back up to the front. And second quarter, I believe the last quarter, or sorry, last quarter you mentioned the possibility of maybe phasing the Permian Highway expansion in over time. I think you needed to do more engineering work to figure out if that was feasible. Just curious if there's an update you can share on that.
spk11: Yeah, so I think you mean Permian Pass, right, not Permian Highway. So the Permian... highway expansion is under construction and expect that expansion to go into service in November. We're really working on two other opportunities, as you noted. One is GCX expansion that hasn't been very active, although with lower gas prices now, there may be some opportunities there. As you recall, fuel cost was a bit of a headwind for us on that expansion project. So again, as gas prices are lower, that may bring that one more into an actionable opportunity. But as far as Permian Pass, really, I think what we are hearing from our customers is that the next need for incremental capacity out of the basin is sometime in late 2026, maybe early 2027. And so as we work with our producer customers and also align them with their desired customers, which I think largely are going to be LNG related along the Gulf Coast, it helps. We need to figure out exactly where and when those volumes need to be there. So I think that's still out there. The overall market still needs that capacity. but nothing really new to announce as far as anything that we're going to accelerate at this time.
spk09: I think the PHP, there was some discussion last time about when we put our compression in, once we get pretty close to the end, is there any chance to be, yeah, a little bit of capacity that's available before the November in-service date, and so I assume that is late in the going.
spk11: Still exploring that, and I think that is a potential opportunity as we move through 2023. Okay.
spk02: Okay, got it. Perfect. Thanks for the color on that. Second question, maybe for David, just maybe an update on how you're thinking about maturities and the overall interest rate exposure for 2023 and beyond. Just kind of curious what options are available to you to perhaps maybe exceed the DCF budget by outperforming on interest expense?
spk15: We'll continue to evaluate different alternatives. We'll talk more about this next week, but we've We've locked in some of our floating rate exposure for 2023 in order to reduce some of the downside risk for the year. But with regard to the overall maturities, we do expect to access the debt capital markets during the year 2023 in order to refinance the large amount of maturities that are coming due this year. The $745 million of cash on the balance sheet coming into the year certainly helps with that. and we've got our $4 billion worth of revolver capacity. So as I said last quarter, and this is still the case, we will wait for favorable market conditions before we access the market and we have the luxury of being patient.
spk02: Understood. Appreciate the time, guys. See you next week.
spk16: Next question in the queue is from Michael Bloom with Wells Fargo. Your line is open.
spk14: Thank you. Congratulations, everyone. Steve, we will miss you, and I'm glad you came to our conference here, so thank you for that. I wanted to ask, back on the Red Cedar CCS project, just wanted to talk about what type of return you expect to generate on a project like that, and just to confirm that this will be entirely fee-based from your perspective.
spk04: Yeah, I mean, we're not going to talk specifics on returns, but I would say they are very comparable with our traditional businesses. So, you know, we're doing the right things from a return standpoint. And I'm sorry, the second question. Commodity exposure on it. Oh, yes, and this is primarily on the ETV side of things, and maybe Tom wants to talk about the Red Cedar JV part of it, but ETV will have minimum volume commitments in place on that transaction.
spk11: And on the Red Cedar side, it's GMP volume, so there is a variable component to that, but their volumes have been growing and expect them to continue to grow.
spk09: Well, this is a good opportunity for us. CCUS is going to have to be part of the solution over the long term, and we have the capability to transport it and put it in the ground and keep it in the ground. And so there's a good longer-term opportunity there, and this is a highlight that you can do these things, and you can do them economically. And so we're happy about this transaction. It's the first, we hope, of many. But there are a number of things that have to be worked out. I think the biggest is getting Title VI permitting for the sequestration through the EPA or having that authority delegated in Texas and Louisiana and other places so that we can speed up the permitting process. Anthony and the team have found a way to use a different kind of permit in a different kind of well situation to enable us to do this. And there may be more of those to do as well, but This is a sign of things to come, we hope and believe, but it is dependent upon an accelerated permitting process from the EPA.
spk14: Got it. I appreciate all that. Second question I just wanted to ask was on the lower gasoline and diesel volumes year over year. Can you just maybe just talk to what you're seeing there? I know your overall volumes, I think, were a little better than overall industry averages, but just kind of what's driving that, and do you think this is sort of a, recurring pattern that we're going to see throughout the year.
spk05: Thanks. Yeah. Yeah. I'd say a couple of things. So first of all, you know, we had one operational issue, uh, in December that, uh, you know, as Ken mentioned, we were down, uh, 0.7% compared to the prior year. We had one of our major lines in California, the one that serves San Diego down for 12 days. Um, and if that hadn't been down, we would be back up to, um, close to flat, uh, sort of quarter of a quarter. And so looking at 2023 and where we stand right now, and we'll get into the budget more next week, we're budgeting an increase of about 3.4% in aggregate. For gasoline, we're looking at something below that. But for jet fuel and diesel together, we're looking at something above that, close to 6.5%. But if you look at You know, starting with kind of jet fuel, recall we've been slower to recover in jet fuel than the EIA given our weighting towards international flights. EIA for the quarter was down about 14% to 2019, whereas, I'm sorry, EIA was down 10% to 2019, whereas we were down 14. So we still got a bit of recovery on the jet fuel front to close with the rest of the country as we see international flights particularly Asian flights come back, we think that'll help us. And recall, we've got our renewable diesel projects coming online on the West Coast at the end of the first quarter. And those have take-or-pay contracts for north of 30,000 barrels a day. So we think that that'll help with the diesel picture. So in looking at what we're seeing right now, midway through January, we seem to be, from a refined products perspective, on top of budget.
spk14: Perfect. Thank you so much.
spk16: Next question is from Brian Reynolds with GPS. Your line is open.
spk03: Hi. Good afternoon, everyone, and congrats to you both, Steve and Kim. Maybe to start off on the kinder-based business, which performed pretty well in the quarter, and just wanted to talk a little bit about, you know, future growth opportunities there. Over the past few years, we've just seen a lot of competitors come into the market, look into a road that Kinder markets share on LNG supply from the Permian in Louisiana. I was just curious if you could talk broadly about how Kinder has a competitive advantage there and whether you guys see yourselves well-positioned for new LNG supply projects going forward or whether effectively the competition has made returns not attractive at this point. Thanks.
spk11: I think as we've said all along, the proximity of our network along Texas and Louisiana, including our storage capabilities there, give us a great advantage whether we're directly building into new LNG export facilities or serving other lines that are doing those connections. Just when you have access to as many basins as we do and the mix of both reservoir storage and salt storage that we have across our footprint, I think we're still in a great position to participate in the LNG export story. We've talked about 50% as being our market share. That's where we are today. We definitely believe our volumes are going to continue to grow, but it's hard to call balls with traction whether we're going to meet or exceed 50% going forward, but I feel really good about our position
spk09: Yeah, and you'll see a little bit more of this, Brian, but what you're seeing when we have a backlog that's $3.3 billion and we're executing it at 3.4x EBITDA multiples is that our network is well positioned and we're able to make relatively modest capital efficient investments in our grid to expand to serve the supply and demand growth that we're seeing across the network. And so that's, you know, in the past we had big long haul projects that might have been done at a slightly higher multiple still attractive returns. But I think this shows you the fact that we have dozens of projects that we're doing and at relatively modest capital expenditures each. but with really nice returns that we are finding that our network is extremely well positioned for the growth along it.
spk03: Great. I appreciate the color. And as my one follow-up, I just wanted to get a little bit of an update on just the RNG projects and the CapEx that are progressing through 2023. You know, how are those projects progressing? And just as the RNG market starts to mature in the middle of the decade or end of the decade, curious if you'd you know, continue to see new opportunities within that Connectrix business and if you see continued CapEx for the next few years.
spk04: Thanks. Yeah, so we have three of our original RNG projects that came through the Connectrix acquisition. They'll be in service this year. Two of them really in the first half of this year. Those are done on an EPC contract. So, you know, that capital is fully baked into our 2023 budget. And then with regards to future opportunities, we've obviously made three acquisitions to date. I think we're looking to grow fairly organically at this point in time. I think there are opportunities out there to grow, and we'll be looking at those on an individual basis. The EPA did come out with a new proposal recently, which opens up a new demand market for us. And so there may be some opportunities to convert some of these assets into electric service as well. So I think there's lots of different opportunities that we're looking at right now in that space. We're excited about the growth.
spk03: Great. I'll leave it there. I appreciate all the color and enjoy the rest of your evening. Thanks.
spk16: Next question is from Keith Stanley with Wolf Research. Your line is open.
spk17: Hi, thank you. Congrats to Kim and Steve as well. I wanted to start, Steve, you said the backlog's at $3.3 billion now, so that's up another $600 or $700 million since last quarter, which... Presumably that's why the growth capex of $2.1 billion for this year was higher than what you kind of pointed to initially. Can you talk to any of the specific projects you've added since last quarter? Because that is a decent amount.
spk09: Yeah, so we have some – most of it is going to be in gas and in RNG on a percentage basis. I think I can give you that, 64%. is in gas and in RNG related. Wait a minute, a little bit more than that maybe. And so this is, it's a mix of power demand, LDC demand, LNG transport, and GNP and WellConnex. And as I said, you know, it's a, It's a collection of a lot of smaller projects and mostly build-offs of the existing network, which, again, makes them capital efficient. It reduces the execution risk on them, and it tends to give us – we get as best return as we can that's available for the market. We tend to end up with better returns on the capital we deploy when that's the composition of the project. So, yeah, $3.3 billion and, again, a 3.4x and kind of concentrated in our low carbon, including natural gas.
spk12: A number of the projects that got added to the backlog are in the other news, like part of the Evangelion Path project, the TVA project, the terminals renewable diesel project. Those are some of the projects that got added to the backlog in the quarter.
spk17: Got it. Thanks. Separate question, just on the buybacks and how you're thinking about it for this year. It's a little bit more of a growth year in terms of spending in 2023. So your DCF is only a little bit above, I think, your CapEx and your dividends. So when you think about buybacks, and obviously you're opportunistic, but would you be willing to increase debt or issue debt or short-term borrowings in order to buy back stock if the opportunity was there since you're well under your leverage target for this year?
spk15: Yes, we would. We think about our capacity for buybacks or other opportunistic opportunities as being our balance sheet capacity as well as the excess cash that we generate in the current year. And so we would be willing to increase our leverage a little bit. We'll be real cautious around it, real measured, and make sure that we're using that capacity in an appropriate manner. But that is the way that we think about our available capacity.
spk00: Thank you.
spk16: The next question is from Neil Dingman with Truist Securities. Your line is now open.
spk07: Afternoon. You all hit on mostly. My question is around first on the renewable diesel, specifically just what future opportunities you see there beyond the Carson Terminal of the committed projects. And you touched around this as well. Maybe the second question just hit this now as well. Just the same thing on opportunities you see around the CCS.
spk09: Yeah, so Dax, if you'll comment on the RD part of it, and John, if you'll talk about the upstream, the feedstock part of it as well.
spk05: Yeah, so just to comment, I mean, as we've said before, you know, right now, every drop of renewable diesel, the United States wants to go to California. I think we expect that as additional state governments later on, a third level of the tax credit, similar to the one that California has, and other states have them, Oregon, Washington, British Columbia, that there will be more enthusiasm for projects there. We've got terminals there. We are having conversations with people. And so I think that's probably other areas in the West Coast are probably next places to potentially develop. And then, you know, certainly with the two hubs that we're developing in both northern and southern California, I think there are additional opportunities to potentially expand those. So that's the majority of it from the refined products perspective. Okay. And feedstocks. Sure.
spk08: I mean, we said last year when we announced the nest idea that we felt that all boats would rise, and there has created a number of opportunities to high-grade our assets, high-grade our customers at Harvey, bring additional products in there, raise rates, But it has also attracted other customers, and this is what we hope is the second of many projects we'll be looking at. A great opportunity to connect with a neighboring facility that's involved in an expansion project where we'll be handling all the feedstocks into the facility under a long-term 10-year take or pay. The other area that's actually helped us too is on our Jones Act vessels. We've seen a lot of movement. coast to the west coast and interest in that, which we think will further tighten an already tight Jones Act market.
spk07: Great answers. Thanks for the time, guys.
spk16: I'm showing no further questions at this time.
spk01: Okay. Thank you very much. Everybody have a good evening. Thank you.
spk16: This concludes today's call. Thank you for your participation. You may disconnect.
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