Q4 2021 Kinder Morgan Inc Earnings Call

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 one 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. Before we begin, I'd like to remind you that as usual 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 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 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 valuation 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 is more of the story than that. While we demonstrated by assets that we acquired during 2021, that we are participating meaningfully in the company coming energy transition. It's also become a parent particularly over the last several months that this transition will be longer and more complicated than many originally expected.

In short, there's 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 paid down over $12 billion in debt since 2016, and 2022 marks the fifth consecutive year we have increased our dividend.

Growing at over those years from 50 cents per share to $1.11 per share.

In addition to returning value to our shareholders through our dividend. 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 bar shareholders with our board and management owning about 13% of the company. I hope and trust you'll keep these factors I've mentioned in mind when making investment decisions about our stock over the coming year. More to come on all of these subjects at our Investor Day Conference next Wednesday, and with that, I'll turn it over to Steve.

I'll turn it over to Steve.

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 will defer to next week some of the more.

In depth and detailed questions on the 2022 budget and the outlook and business opportunities.

As the 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 Yuri. Putting Yuri aside, we were running a bit shy at plan and 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

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 Yuri. Putting Yuri aside, we were running a bit shy at plan and 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 Yuri.

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 Kinetrex.

A 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 4.3 X.

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 4.3 X.

showing that debt to EBITDA of 4.3 X.

Then invest in attractive return projects and 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 in at $1.3 billion were at the lower end of that range in our 2022 budget.

Not at the 2 to 3 billion that we experienced in the last decade.

We're also generally seen here, 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 as 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 released 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.

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.

<unk> in the years ahead with that I'll turn it over to Kim.

Okay. Thanks, Steve. Alright, starting with our natural gas business unit for the quarter. Transport volumes were down 3% or approximately $1.1 million [inaudible] per day versus the fourth quarter of 2020 and that was driven primarily by continued decline in Rockies production.

The pipeline outage on AT&T and FEP contract expirations.

Which were offset somewhat by increased LNG deliveries and PHP and service volumes.

Physical deliveries to LNG facilities off of our pipeline averaged about 5 million [inaudible] per day, that's a 33% increase versus the fourth quarter of '20.

Our market share of LNG deliberates remains around 50%. Exports to Mexico were down in the quarter when compared to the fourth quarter of 2020 as a result of third party capacity pipeline capacity recently added to the market.

Overall deliveries to power plants were up slightly at least in part partially driven by coal supply issues.

While LDC deliveries were down as a results of lower heating degree days.

Bulk of lower heating degree days.

Our natural gas gathering volumes were up 6% in the quarter for gathering volumes, though I think the more informative comparison as the sequential quarter.

Compared with the third quarter of this year. Volumes were up 7% with a big increase in Haynesville volumes, which were up 19%.

And [inaudible] volumes, which were up 9%.

Volumes in the [Eagle Ford] increased slightly.

Our product pipeline segment refined product volumes were up 9% for the quarter versus the fourth quarter of 2020.

Compared to pre-pandemic levels using the fourth COVID-19, as a reference point, road fuel.

Gasoline and diesel were down about 2% and jet was down 22%.

In Q3, road fuels were down 3% versus [pre-pandemic number].

So we did see a slight improvement.

Crude and condensate volumes were down 3% in the quarter versus the fourth quarter of '20.

Sequential volumes were down approximately 1% with a reduction in Eagle Ford volumes, partially offset by an increase in the Bakken.

If you strip out double H pipeline volumes from our Bakken numbers.

That pipeline is impacted by alternative egress option and you look only at our Boston gathering volumes they were up 7%.

In our terminals business segment, our liquids utilization percentage remains high at 93%. If you exclude tanks out of service for required inspection.

Utilization was approximately 97%.

Iraq business, which serve consumer domestic demand is up nicely versus Q4 of '20 and also up versus pre pandemic levels. Our hub facilities, primarily Houston and New York are driven more by refinery runs international trade and blending dynamics are also up versus the Q4 of '20.

But those terminals are still down versus pre pandemic levels. We've seen some green shoots are marine tanker business with all 16 vessels currently failing under firm contracts.

On the bauxite volumes increased by 8% and that was driven by coal.

Volumes are up 2% versus the fourth quarter and '19.

And our CO 2 segment crude volumes were down 4% CO 2 volumes were down 13% and NGL volumes were down 1%.

On price, we didn't see the benefit of increasing prices on our weighted average crude price deck.

Due to the hedges, we put in place in prior periods when prices were lower. However, we did benefit from higher prices on our NGL and CO 2 volume.

For the year, versus our budget, crude volumes and price were better than budget. CO 2 volume and price were better than budget and NGL price was better than budget. So a good year for our CO 2 segment relative to our expectations and CO 2 volumes have started the year above our '22 plan.

Our budget crude volumes and price were better than budget C. O two volume and price were better than budget and NGL price was better than budget. So a good year for our C. O two segment relative to our expectations and C. O. Two volumes have started the year above our 22 plan.

As Steve said, we had a very nice here. We ended at approximately 1 billion better on DCF and $1.1 billion better than our EBITDA.

With respect our EBITDA budget. And most of that was due to the outperformance attributable to winter storm or all of it was due to the outperformance attributable to the winter storm Yuri. If you strip out the impact of the storm and you strip out roughly $60 million and pipe replacement project that we decided to do

during the year the impact of sustaining Capex.

We ended the year on plan for both EBITDA, and DCF. And with that, I'll turn it over to David Michael.

All right. Thanks Kim.

So for the fourth quarter 2021, we are declaring a dividend of 27 cents per share, which brings us to $1.08.

Of declared dividends for full year 2021, and that's up 3% from the dividends declared for 2020.

During the quarter, we generated revenue of $4.4 billion.

Up $1.3 billion from the fourth quarter of 2020.

It's largely up due to higher commodity prices, which also increased our cost of sales and in the businesses where we purchase and sell commodities. Revenue less cost of sales or gross margin was up $107 million. We generated net income to cam I of $637 million.

Up 5% from the fourth quarter of 2020.

Adjusted net income, which excludes certain items was up was $609 million up 1% from last year and adjusted EPS was 27 cents in line with last year.

Moving onto our segment performance versus Q4 of 2020, our natural gas segment was up driven by contributions from Stagecoach and PHP.

Partially offset by lower contributions from FEP, where we've had a contract explorations NGPL. Because of a partial interest sale and ETNG due to lower usage and park and loan activity.

Products segment was up due to refined products volume and a favorable price impacts. Our terminal segment was down driven by weakness in the Jones Act tanker business and an impact from a gain on sale of an equity interest in 2020.

Q2 was down has favorable NGL and CO 2 prices were more than offset by lower CO 2 and oil volumes. The oil volumes at or above plan.

G&A and corporate charges were higher due to the larger benefit costs as well as cost savings we achieved in 2020, driven by lower activity due to the pandemic.

[RJBD and DDNA] was lower primarily due to lower contributions from the Ruby pipeline.

And our sustaining capital was higher versus the fourth quarter of last year.

That was a higher in natural gas terminals and products.

And that is a fairly large increase but we were expecting are you expecting the vast majority of it has.

Much of the spend from earlier in the year was pushed into later in the year.

For the full year versus plan on sustaining capital were $72 million higher and roughly 60 million of that is due to the pipe replacement project that Kim mentioned.

So total DCF of 1.093 billion or 48 cents per share is down seven cents versus last year's quarter, and that's mostly due to the sustaining capital.

On the balance sheet, we ended the year with $31.2 billion of net debt with a net debt to adjusted EBITDA ratio of 3.9 times down from 4.6 times at year end 2020.

Reveal removing the nonrecurring Yuri contribution to EBITDA that ratio at the end of 2021.

It would be four six times, which is in line with the budget for the year.

Our net debt declined $404 million from the third quarter and it declined 828 million from the end of 2020 to reconcile the change for the quarter.

We generated 1.093 billion in DCF. We spent a paid out 600 million of dividends, we spent $150 million and growth Capex JV contributions had acquisitions and we had a working capital source of $70 million.

And that explains the majority of the change for the quarter for the year.

We generated $5.460 billion of DCF.

We paid out dividends of $2.4 billion.

We spent 570 million on growth Capex and JV contributions.

We spent 1.53 billion on the stage coach and connect tricks acquisitions.

We received $413 million in proceeds from the NGPL interest sale.

And we had a working capital use of approximately $530 million and that explains the majority of the 828 million reduction in net debt for the year.

Approximately $530 million and that explains the majority of the 828 million reduction in net debt for the year.

And that completes the financial review. And I'll turn it back to Steve.

Thanks, David and operator, if you would come back on.

We will open it up for questions and I'll just remind everybody on the line that has occurred as soon as we have been doing for three years now. As a courtesy to all the callers, we ask that you limit your questions to one and one follow up. But if you've got more questions get back in the queue and we will come back around to you.

So with that operator, let's open it up for questions.

Yes, Sir. Thank you. If you would like to ask a question over the phone. Please press star followed by one. Please make sure that your phone is on mute and record your name clearly when prompted. If you wish to withdraw your question you can press star two. Thank you. Our first question comes from Jeremy Tonet with JPMorgan Your line is open, Sir.

Hi, good afternoon.

Just wanted to start off with a couple of pipeline questions. Because you know in the Permian our analysis points towards mid '24 need for more gas takeaway and that depends on Mexico actually absorbing gas. They are expected to take which could be a swing. So just wondering your thoughts here as far as the need for new pipe and do you see that more.

Just wanted to start off with a couple of pipeline questions. Because you know in the Permian our analysis points towards mid 'twenty 'twenty four need for more gas takeaway and that depends on Mexico actually absorbing gas. They are expected to take which could be a swing. So just wondering your thoughts here as far as the need for new pipe and do you see that more.

We're likely to be a newbuild or have input costs move steel labor or what have you to the point where our conversion from oil to gas could make more sense to come first. Just wondering given take between the two options. How do you think it shakes out at this point?

Okay. Good question in and I'll ask Tom to, Tom Martin to weigh in on this as well, but we are hearing from the shippers that we're talking to the customers that we're talking to.

Date says early or timeframe as early as late 2023. Now there's not time from now until then to get actually get something done, but we're also hearing so late 2023 years or 2024.

I think our starting assumption is that it really will need to be an additional newbuild pipe.

I think our starting assumption is that it really will need to be an additional newbuild pipe.

Which I will make clear you know, we've shown our our successful ability to build those pipes. Get it done even though there's a difference difficult circumstances, but as always we're gonna be very disciplined and it will be taken a very close look at the permitting environment and making sure that we're getting a good contractual coverage et cetera et cetera.

We will be disciplined we don't need to win the third pipe just for the sake of winning it will we'll do it on economic terms.

You know the difficulties of the conversion I wouldn't say, Jeremy that it can't happen, but the a lot of the the pipe that's out there while it's not fully contracted maybe and there's certainly an excess of crude takeaway.

There was a fair amount of work to do with existing shipper arrangements there. At least that's our perception and so while it's a possibility you know it kind of tilts toward we think newbuild capacity, but Tom, weigh in here.

Weigh in here.

No, I agree with you, Steve, I mean I think.

We certainly had conversations about our crude pipe conversions and I think just the complexity of managing their raymond arrangements around the oil and in conjunction with the.

The gas out of the equation is made has made that pretty tough still.

Working those opportunities, but I think as you said the more likely.

Next step is gonna be a newbuild pipe. I think there there are some small pockets of expansion opportunities to absorb incremental volumes, but I think for the market clearly is going to need another significant pipeline Greenfield build you know in the time frame is that you alluded to.

Got it so even with inflation it seems like a newbuild more likely than conversion at this point. So just wanted to touch on that that's very helpful and then.

Shifting gears on gases well it seems like there's there might be a number of I guess a rate cases across the gas pipeline settlement segment for this upcoming year and just wondering at a high level. If you can kind of talk through our bounds of outcomes or how you're thinking about those as it feeds into your guidance for the year. I imagine the analyst day, we'd have a lot of gory detail there.

But just wondering if you could provide us any other thoughts at this juncture.

We think we've adequately accommodated that in our outlook. There are a number of discussions going on as you alluded to. A couple of them are on and I'm talking about things where we have obligations. For example, while cost of revenue studies or where we have an existing rate case to have the two of them are on.

Our joint venture pipeline, so by all of the cost and revenue study and are engaged with our customers on NGPL that we own 37.5% of an [FTT.]

Energy transfer is the operator there. They are deep into the settlement process have a filed settlement.

It'll meant.

That's a 50/50 pipe for us, but then we have a cost and revenue side. It was due late last year on an El Paso. That's still very early stages, and then are working with our customers on a we're kind of combining CIG and WIC here together, but so that's the set of pipes that are affected.

That's the set of pipes that are affected.

But we think we've got a good discussions underway with shippers and well no outcomes are final yet, but I think we've adequately accommodated.

That's a helpful. I'll get back in the queue. Thanks.

Thank you..

Thank you. Our next question comes from Colton Bean with Tudor Pickering, Holt and Company. Your line is open.

Afternoon. I appreciate the earlier thoughts on capital allocation would just love to follow up on the balance sheet component. You have the existing target of 4.5 times, but it looks like you'll under shoot. This year. We've also seen the broader midstream group trending lower we had many of the large caps now looking at something below four times. So can you update us on how you think about the appropriate financial leverage for TMI?

And any factors that might cause you to ship that mark.

Sure I'll start and then David Michaels you discuss as well. So we believe that the 4.5 is still appropriate you know. If you look at where we really rate. We rate a little better than triple B flat and that's a function of the composition of our business and our cash flows.

Significant you know long haul transmission pipe assets and storage assets that are under long term contracts with fixed reservation fees and the like when you look at the composition of our cash flows and we will go into this in some more detail.

The take or pay plus the base plus hedged I mean we have I think a very attractive profile of the underpinning for those cash flows.

And so we think that that's appropriate. It is nice to have a little capacity under that this year.

At the 4.3 times as you alluded to David anything else you wanted to add.

Yeah.

In addition to what you just covered Steve.

Colton, we regularly look at.

If we were to lower our leverage level if that were to achieve or to result in a meaningful reduction in our cost of capital. In the current markets we we don't see that.

We don't see a lower a meaningfully lower cost of capital if we were to lower our longer term target level.

Lower or.

Longer term target level.

That may change in the future, but as of right now that that plays into it as well. So I think Steve's points are are the right ones to keep in mind, we're comfortable given our many credit factors a scale.

The business mix diversification contracted cash flows that are predictable, we're comfortable at that longer term leverage level.

But as Steve mentioned, we do see some value in having some cushion underneath it.

Got it. Appreciate that detail and then maybe just back on natural gas on the RSG supply aggregation strategy. Is that a service that you view is helping attract volumes to the KMI system or something you may be able to monetize in its own right?

Whether that's through tariff surcharges marketing or something similar.

Yeah, we think it's a it's a product that increasingly the market is attracted to. We've done several of these deals with responsibly sourced gas we have.

filed with the FERC to set up some paper pooling points for people to ship on our system with responsibly sourced gas. And so there is a lot of focus on lowering methane emissions and low methane emissions gas is an attractive proposition to our customers.

You know it is a value add we think, I don't know that you really you're not really seeing that much in terms of pricing but.

In the longer term it could be a value added service.

But we think we're given the market what it wants here in that form. And I think all the work that we've done to keep our methane emissions.

Low over really over decades now since the nineties, we've been working on this.

We see that as as value add and our customers tell us it is. And so I think this is a trend that we're at the beginning of and expect to continue to see grow over time and to have the world participate in it. Tom, anything you wanted to add?

So Steve, I think you covered it well. I mean, we do believe this is the kind of the beginning of a trend here and we'll be looking for opportunities to expand.

What we're doing.

Proposing to do a filing to do on [inaudible] look for opportunities to expand that on the other other assets as well.

But we have gotten a lot of questions and how people can and concerns about exactly how it's going to operate and so we'll be working with our shippers on trying to come up with an approach.

That gets as many people as possible onboard with it so yeah. We're in, we expect it to go through but we're in kind of early stages.

Thanks for the time.

Thank you. Our next question comes from Jean Ann Salisbury with Bernstein. Your line is open.

Hi, do you do this past quarter kind of a trough for your Permian gas pipe utilization with obviously that came on during the third quarter and that's kind of the last new pipe in the queue so your pipes kind of reflate over the next year or two?

We've had some variances depending on whether and where.

You know where people want to go with the gas that they have but generally Tom, our GTX and PHP had been operating pretty close to capacity right.

Correct.

I think I meant actually more on some of the other ones that that perhaps you were like fully [inaudible].

Yeah. So we also serve out of the Permian is as egress out of the Permian our NGPL system.

And also our EPNG. We did see some volume reduction of EPNG.

Because we had a. We've had to reduce activity on our line 2000 following.

We've had to reduce.

Reduced activity on our line 2000 following.

an accident on that pipeline earlier in the year. And as we put on our electronic Bulletin Board. We're in the process of doing.

Some additional inline inspection on that line now and so it's going to be it's going to be out for a few months, but will ultimately safely restore that pipeline to service and the market does want that capacity. So I have little concern that we'll be able to place that.

I don't know if I'd use the term trough, but I think if you're looking at downturn, that's probably what you're saying.

That makes sense and then just to kind of stay on that Permian topic, and there's obviously a lot of gas flaring in the Permian in 2019, when we last ran out of gas takeaway. In the Bakken. We're hearing that e&ps are kind of committed to not increasing thing this time around.

You kind of heard that put them out of the Permian e&ps as well, but it feels like if that were true, you'd see a little bit more hustle.

Getting a gas solution in place for '24. So I was wondering if you can kind of just to square that for me. Is it like some are determined not to [inaudible] but some are not.

Not.

Yeah, So I think.

There are two things that I think have changed since 2019. One is that is bad. People are not interested in flaring gas and there is increasing.

Pressure, even if you know you might otherwise elect to. There's increasing pressure from the regulator to not do it and so flaring is just far less acceptable. Not that it was ever fully acceptable, but you know what I mean, a degree of scrutiny, it's far far greater scrutiny on it now in both in inside that.

Companies, primarily but also from regulators. The second thing that's changed and it's an important thing too is the gas was less valuable as a standalone commodity.

In 2019, and you know it was almost like to get the oil out of people who are just looking for someplace to put the gas right.

And wre even willing to flare it and in the absence of an acceptable takeaway alternative.

I think this is valuable gas and I think people are going to want to find a home for it in a pipeline and take away and monetize that for their shareholders. So we've seen a change in the in the tolerance for flaring and also a change in the value of the commodity that was previously flared.

Great that's really helpful. Thank you.

Thank you. Our next question comes from Keith Stanley from Wolfe Research. Your line is open.

Hi, good afternoon.

I wanted to start on the 2022 growth Capex, the $1.3 billion.

It's a little higher I think than than expected compared to the backlog the $1.6 billion over over a few years. Is it fair to think you added a fair amount of incremental projects since the last quarter.

Quarter end.

Any color on what that might be and I guess I'm particularly focused on our RNG and how you might be spending money in that business this year.

Yeah, and we will again, Keith, will give you more detail on this when we get to next week.

I think over $800 million of that 1.3 was what was already in our backlog and not necessarily all through '22 and subsequent periods.

And we do have some expectation as the market has gotten strong and volumes have grown but there will be some need for some need for additional GNP Capex.

Some expectation as the market has gotten strong and volumes have grown but there will be some need for some need for additional.

But also natural gas and natural gases.

Our natural gas and natural gases.

Yeah natural gas and we do have some placeholder dollars in for a potential additional RMG opportunities that we that we put in the budget, but beyond that.

I'll ask you to hold off until you see our details when we get to next week.

Ask you to hold off until you see our details when we get to next week.

Great, Thanks, and sorry to beat a dead horse on the potential new Permian gas pipeline. Can you just give an update on

I guess appetite you're hearing from producers for 10 year type of contracts on a potential new pipeline? And then I don't think you said, but what's the soonest you think you could complete a new pipeline if you moved forward today are as of now?

I guess appetite you're hearing from producers for 10 year type of contracts on a potential new pipeline and then I don't think you said, but what's the soonest you think you could complete a new pipeline. If you moved forward today are as of now.

All of us, I'll take the last one and Tom I'd ask you to cover the first one. In terms of timing.

You know PHP took 27 months from FID to in service.

And I think it's reasonable to expect that this will take that long or longer just as a result of permitting uncertainty and the like.

But so I think 27 months.

You know, maybe a little plus as kind of a reasonable timeframe to think about and Tom, do you want to talk about the appetite from the long term takeaway contracts?

Yeah, I mean, I think the market understands that it's a minimum of 10 years to support a project of this scale and I think you.

To support a project of this scale and I think you.

You know I think the overall the market understands and believes there may even be another pipe needed down the road and so I think from a from a terminal value perspective.

Understands and believes there may even be another pipe needed down the road and so I think from a from a.

That kind of makes sense, but I think.

I can't speak to whether they enjoy the taste of that tenure 10 year tender, but I mean, I think the market understands it and and I think given that there's likely to be more infrastructure needed in the longer term, I think that makes sense the market as a whole.

Enjoy the taste of that tenure.

10 year tender, but I mean, I think I think the market understands it and and I think given that there's likely to be more infrastructure needed in the longer term I think that makes sense the market as a whole.

And again, we will be as you would expect very focused on risk adjusted returns here as we think about, as we think about this project.

And as we think about this project.

Thank you.

Thank you. Our next question comes from Spiro Dounis with Credit Suisse. Your line is open.

Thanks, operator, and happy New year. First question is just on natural gas fundamentals and anti somewhat into some of these questions were hearing on Permian pipelines. I guess, if we look back at the last two years or so the downturn associated gas basins really create a lot of breathing room for the Haynesville in Appalachia.

And we're seeing that evidenced in some growth here I guess as we look forward right and some of these comments. What we're hearing is associated gas is back right. We're seeing a pretty strong recovery in these basins as evidenced by the prospects for Permian pass. It seems like that timeline keeps moving up a little bit.

Just curious as you sort of think about the call on gas directed basins going forward.

Is associated gas a riskier again could that stymied some of the progress and growth we've seen so far?

Yeah. I'll focus on the Haynesville, which is of course, where we have gathering assets. You know really I think producers have been disciplined about getting back into the Haynesville. I think they still are but they are they are back and we have a very good system there, meaning that we've got we've got room to run on the capacity that's already in.

I'll focus on the Haynesville, which is of course, where we're where we have a gathering assets. You know really I think producers have been disciplined about getting back into the Haynesville I think they still are but they are they are back and we have a very good system there, meaning that we've got we've got room to run on the capacity that's already in.

The ground, if you will in relatively capital efficient investments to add additional throughput to that two BCFa day system at kind of the max.

At two Bcf a day system at kind of the Max.

You know how the how the give and take place plays out precisely between associated gas and and dry gas. You know always that's always a dynamic to keep track of, I think you know we're looking at two new LNG facilities coming online here in early 2022, we're setting new records.

Associated gas and and dry gas you know always that's always a dynamic to keep track of I think you know we're looking at two new LNG facilities coming online here in early 2022, we're setting new records.

Kim mentioned, the 33% that we saw year over year on an LNG volumes US LNG is still a very attractive value proposition to world.

Energy markets. And those facilities had been doing in those up those developers have been doing a good job of getting those getting those under contract. So we still see the demand side of that picture as pulling hard on.

Both associated gas and dry gas.

Tom, anything else you want to add?

I will say that I think you covered it I mean, it's I do think that that is those two items are the biggest changes from the last time we saw a major growth in associated gas.

It's the export market is really pulling on this as well as LNG and Mexico. And then the other factor is our capital discipline and I think from the producer community. That's also I think a key determinant and how the timing of these additional volumes come on.

The export market is really pulling on this as well as LNG and Mexico and then the other factor is our capital discipline and I think from the producer community Ah. That's also I think a key determinant and how the timing of these additional volumes come on.

Got it thanks, Steve. Thanks, Tom. Second question, well I'll come back to the 750 million of cash flow available for share repurchases. Yeah. I know you said opportunistic which makes sense, but just curious if you could remind us again how to think.

About the trigger point on when you deploy that cash for buybacks. Is it a yield metric you're looking at and just how you're thinking about it? And maybe outside of that how are you ranking alternative highest and best uses for that excess cash? I you know I noticed in this press release I think you used the phrase attractive opportunities in your commentary as well. I don't think that was a phrase you used in December and so I hate to nitpick here, but just curious since December.

Your ranking alternative highest and best uses for that excess cash I you know I noticed in this press release I think you used the phrase attractive opportunities in your commentary as well I don't think that was a phrase you used in December and so I hate to nitpick here, but just curious since December.

[inaudible] Do that weren't there before and how you're weighing those against buybacks?

No I don't recall a language change, but I'll take your word for it.

No, I mean, we've always thought about this as capacity that's available for attractive opportunities including share repurchases.

And that's how we still think about it.

In terms of how we look at share repurchases and look at other opportunities that we look at them on a risk adjusted return basis.

And so there's you know there are a number of considerations there.

But when you look at it is obviously the dividends that were.

That we're taking off the table. We look at at a terminal value assumptions and assuming no multiple expansion. And then we look at variations on that last.

In terms of the terminal value and we make a decision based on a risk adjusted basis. And so in a share repurchase obviously, you are for sure taking the share count down and taking shares out of the denominator and leaving your remaining your cash flows that you're producing available to a smaller group of outstanding shares. When you're looking at a project you're going to be looking at a lot of things like well you know.

Based on a risk adjusted basis and so in a share repurchase obviously you are for sure taking the share count down and taking shares out of the denominator and leaving your remaining your cash flows that you're producing available to a smaller group of outstanding shares when Youre looking at a project youre going to be looking at a lot of things like well you know.

What is the permitting risk here? What is the cost risk here?

What's the terminal value on that? And this is sort of a you know a single shot investment as opposed to purchasing shares and existing diversified solid stable company.

A single shot investment as opposed to purchasing.

Purchasing shares and existing diversified solid stable.

And so we are you know, obviously, there's, some weighing back and forth and discussion back and forth on how you get to that but we tried to do it in a disciplined way based on returns.

Got it, thanks for the color, Steve, look forward to seeing you guys next week.

Thank you. Our next question comes from Mark [Sollecito] with Barclays. Your line is open.

Hi, good afternoon. So wanted to start on stage coach and I was wondering if you could comment on the integration there. So you mentioned the assets have been running ahead of your model, but just wondering as you think about the '22 budget.

What's factored in as far as some of the commercial synergies that you've talked about versus what might be upside as we look a little further out?

Yeah. So we have fully integrated the the assets commercially.

We have fully integrated the the assets are.

Commercially.

And at this point operationally, maybe a little bit of transition on a control room still ongoing there, but a really.

Fully integrated and especially pointing out the commercial part of it. I mean, there are some things that we had assumed we'd be able to do in the model that we've been able to do. And actually do a little bit better and that's what leaves us slightly above our acquisition model, we think there's more of that to come.

We baked what we see realistically for 2022 in our '22 guidance. And you know down the road I think I think we'll continue to find more. Tom?

For 2022 in R 22.

<unk> and you know down the road I think I think we'll continue to find more time.

No, I think you covered it well, Steve I mean, it's gone very well.

The integration with not only the asset into the portfolio, but with our TGP business as well I think.

We anticipated some synergies there I think we're seeing more green shoots. For more to come as we go forward.

Green shoots.

More to come as we go forward.

Great. I appreciate the color there.

And then similar to discussion earlier on the Permian gas takeaway outlook. I was wondering if you could share your latest thoughts on the Bakken gas takeaway picture. I know a couple of years ago, you were working on a potential solution with some partners that would utilize some of your Rockies pipes. So just wondering where that stands today. Tom.

Tom.

Still are still working that opportunity, you know, nothing nothing really new to report at this time, but still in the earlier stages and I think.

In the earlier stages and I think.

We'll continue to try to progress that opportunity.

Great. I appreciate the time.

Thank you. Our next question comes from Michael Lapidus with Goldman Sachs. Your line is open.

Hi, guys. Thank you for taking my question. Just curious I'm trying to think a little bit about the impacts of omicron in the quarter and really the cadence during the quarter. When you look at refined products volumes relative to what your expectations were, can you just talk a little bit and obviously some seasonality plays into it.

How refined products volumes kind of appeared in the latter portion of the quarter and maybe entering into January versus kind of the October period, when omicron was but not really on the radar screen.

Right. Dax, I'll ask you and then John to talk about that from the perspective of each of your businesses you got first acts.

Dax I'll ask you and then John to talk about that from the perspective of each of your businesses you got first acts.

Yeah, I would say.

Not probably not a not a huge.

Pact I mean, one thing that I think one of the most salient pieces of data if you compare where we were in the fourth quarter.

Compared to the prior year, we were 9% above as Ken said, we were 10% above the prior year for the year to date, but if you look at December only we were 15% above so as we exited the year.

We saw some pretty pretty positive momentum so.

We saw a little bit.

A little bit maybe a little bit more downside on jet fuel, but combined.

You know it was a pretty positive. So that's that's the way we saw the year exit we didn't really see a meaningful downside.

Okay and John .

Sure no meaningful impact Q4 December we saw very strong rack volumes were up 15, 5% so coming into January we only got a couple of weeks as data points, but our Midwest volumes are up 2% on a year over year basis, Our Jefferson Street truck rack.

Houston is up 9% the only weakness we're seeing is in our northeast facilities, which are down 5%, but net net we're up 1% on a year over year.

Down slightly to budget, but I think more of that has to do with the too bad.

No storms that we've had in the Midwest and northeast more so than the omicron impact.

Got it. Thank you guys much appreciate it and look forward to next week's information.

Thank you. Our next question comes from Brian Reynolds with UBS. Your line is open.

Hi, good evening, everyone and thanks for taking my question I'm, just trying to square away. Some of these Permian Nat gas pipe comments and kind of timeline commentary just wondering if theres a limited appetite for flaring.

Value in natural gas and a 24 month build time does this simply them simply imply that there's a slowing in Permian growth at year end '23 or is there a scenario that we could see potentially more flaring from privates versus publics to get through this period of tightness? Thanks.

Tom, you want to talk about that?

Yeah, I mean I think there are limitations as to how quickly a new project could be brought into service. So I think the producers will manage you know the development of their volumes carefully with that in mind.

To minimize flaring, but I mean, it may end up being more of a factor than they desire it to be. 

To minimize flaring, but I mean, it may end up being more of a factor than they desire it to be. 

To minimize flaring, but I mean, it may end.

End up being more of a factor than they they desire it to be.

Based on the economics.

Great. Thanks.

A follow up just on the RST supply aggregation pooling system. I'm just curious if you could talk about how you look to expand that across the system and if that's something that you could also expand [inaudible]

Permian Nat gas pipes as well. Thanks.

Yeah, Tom why don't you talk to that?

Yeah, So I mean again based on the traction that we get on TGP, I think that will give us a lot of guidance as to where we go next.

The traction that we get on T. G. P. I think that will give us a lot of guidance as to where we go next.

And pursue other other pipelines to deploy the same concept, but clearly, the market is asking for this type of service. And especially the export market LNG, especially I think the domestic market will catch up and so I would think the natural candidates would be additional pipes that serve export opportunities.

Deploy the same concept, but clearly.

The market is asking for this type of service and especially the export market LNG, especially I think the domestic market will catch up and so I would think the natural candidates would be additional pipes that.

You know would be, those would be sort of additional opportunities that we consider going forward.

We view this one as the first sort of a test case.

And we'll use depending on how well go how well it goes, how quickly it takes off. You set a sort of a blueprint as to how we go forward.

Great. That's it for me. Thanks for taking my question and have a great day.

Thank you. Our next question comes from Timm Schneider with Citi. Your line is open.

Yeah, good afternoon.

Quick question, a higher level question for you is kind of the largest or one of the largest players in midstream land here.

How challenging or maybe not challenging hasn't been kind of threading the needle with respect to capital allocation? What I'm getting at here is you can kind of have four buckets, Capex, M&A balance sheet divot.

Dividend buybacks, obviously, the narrative has been very much buyback driven and stocks have been rewarded for that. But how do you kind of think about maybe not even short cycle type of Capex, but longer cycle type of Capex that maybe it doesn't have  an immediate return?

That could be larger capital outlays, but maybe the right thing for Kinder Morgan and for others for that matter to kind of spend money on now to position that we're a place I guess, along the energy value chain than the future.

Yeah. Good question. So you know we've been kind of a broken record on this I mean, there have been there.

There have been times when people wanted to see backlog builds, times when people want to see you know dividend builds. Times when I want to see share repurchase et cetera, what we tried to do is.

Is the consistent and principled about how we look at it and do it in a way that's you know maybe most valuable for our shareholders. And we think that the order of operations that we've repeated again and again as you know is the right one, you know, make sure the balance sheet is strong we've gotten there.

Make sure that we sanctioned the projects that add to the value of the firm that give us returns that are well above our weighted average cost of capital.

That we we sanctioned the projects that add to the value of the firm that give us returns that are well above our weighted average cost of capital.

The commentary I gave there was, you know, we've kind of been at the low end of our $1 billion to $2 billion that we talked about.

And we've kind of been tilting more towards smaller projects that are on our existing footprint that have nice returns and lower risk building off of your existing footprint. Anyway you go through those and then with the excess cash you'd look to return to shareholders in the form of a dividend that's well covered.

Nice returns and lower risk building off of your existing footprint anywhere you go through those and then with the excess cash you'd look to return to shareholders in the form of a dividend.

Dividend well covered.

And then share repurchases. Now, to your question on how do you look at something that maybe adds to the value of the firm over the longer term.

I'll point you to an example, a real life example from last year of how we've looked at that. And we do think that you know renewables, while our assets are going to be needed in the service that they're in for very very long time, there's no question that there's more growthavailable in the renewable sector.

But we've been again disciplined about how we've entered into that and make sure that we understand what we're looking at and dealing with here. And that it's going to produce a really attractive return for our investors and that we've got a good line of sight, we're not building it based on you know some hockey stick projection.

Instead, we were looking at the acquisition of Kinetrex, which is the example I'm referring to.

And the acquisition of kinetics, which is the example, I'm referring to are.

A good existing platform business that had three shovel ready projects under contract already and with an EPC contract in place. And so we felt very comfortable bringing that to our investors, bring it to our board and bringing it to our investors and saying look, this is a nice example of how we're looking at something that it is going to be.

It is going to be a year or two down the road before you see this turned into a really attractive multiple but we have a really defined line of sight on that. And so I think that's a reasonable way to think about how we will approach this.

And not for example to just say oh, we think solar is going to be you know great and even though we don't know a whole lot about it, we're going to pile in. That's really not the way we've traditionally done things.

And I think we've shown you how we're looking at these and we've been consistent in our messaging about we want to be able to demonstrate attractive returns to our investors that we entered these businesses.

I would just add to what Steve said really the primary objective of this management team and our board is to be really good stewards of this enormous amount of cash flow that we're generating. And so it's an art, not a science, but we weigh all of these things and making what we believe are discipline good decisions about where to allocate this capital.

That's probably the most important single thing we wrestle with every day.

Alright. Thank you I appreciate it. That's all I had.

Yeah.

Thank you. I'm showing no further questions in the queue at this time. Thank you all very much and have a good evening. Thank you.

That does conclude today's conference. You may disconnect at this time and thank you for joining.