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, 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.

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?

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.