Q3 2023 Kinder Morgan Inc Earnings Call

Please mute your phones and state your first and last name and prompt that today's conference is being recorded if you have any objections you may disconnect. At this time. It is now my pleasure to turn the conference over to Mr. Rich Kinder executive Chairman of Kinder Morgan, Sir you may begin.

Thank you Michelle and before we begin I'd like to remind you as usual that goodbyes 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.

Material assumptions expectations and risk factors that may.

Cause actual results to differ materially from those anticipated and described in such forward looking statements.

My remarks at the beginning of our second quarter Investor call I talked about future demand for natural gas and why that makes us bullish about the future of came on.

The biggest portion of that growth in demand is attributable to LNG. So let me follow up on this call by reviewing the latest estimates regarding future U S feed gas demand.

One of the Countrys LNG export facilities.

S&P global commodity insights estimates LNG feed gas demand at 13.1 Bcf a day for 2023.

And projects that it will grow to 24.7 Bcf a day in 2028 and 27 five Bcf a day and 2023 IEA estimates U S. LNG exports as a share of global LNG supply will grow from 20% in 2020.

Two to almost 30% in 2026.

All of these numbers demonstrate incredible growth.

Is driven of course by new LNG export facilities.

Most of which are currently under construction.

Now how does this increase to that effect, the midstream energy segment, and specifically Kinder Morgan.

To meet this increased feed gas demand in the country is going to need additional pipe lives and not just header pipeline. So the export terminals, but also significant expansion of the pipeline infrastructure upstream from those header systems and terminals, while we believe haynesville production will grow and supply a portion of this demand.

Because of its proximity to the LNG facilities in Louisiana, and South East, Texas, It will not be able to fulfill all of these growth volumes and additional takeaway capacity from multiple basins will be required extra.

Access to multiple basins is also important to help solve the excess nitrogen problems confronting LNG export facilities.

While there are other midstream players will also benefit we think Kinder Morgan, which is currently transporting a little less than half of all U S. LNG feed gas is an excellent position to take advantage of this tremendous opportunity because of the extensive footprint about pipeline networks, particularly in Texas and Louisiana.

Got it.

So much of the additional demand will occur.

I'll turn it over to Kevin and the team.

All right. Thanks, Rich I'll make a few overall points and then I'm going to turn it over to Tom and David to give any more details.

We had a solid quarter financially we continued to find opportunities to add to our backlog, we repurchased 73 million in shares at an average price of $16 77, and that brings us to $472 million of share repurchases year to date at a very attractive price of 16 50, yet.

Financially our portfolio of assets performed well with contributions from the segments up 5% driven by increases in natural gas products and terminals products had a particularly strong quarter up 22%.

Overall, our results were largely flat because of increased interest expense and sustaining capex, which we anticipated in our budget for.

For the year versus our budget our expectations remain the same as what we communicated last quarter slightly below our guidance, which can all be attributed to lower commodity prices.

Versus the guidance. We gave you last quarter, we have seen some benefit from improved commodity prices, but that was largely offset by other moving pieces. For example, delays and R. E. T V projects, all netting to leave US approximately in the same place for the full year that we discussed with you last quarter.

We continue to see good opportunities to add to the backlog and more than eight or more we're able to more than offset the projects that went into service with new additions.

Backlog now stands at three 8 billion with an average multiple of four seven times.

And we see opportunities beyond the backlog, especially in natural gas is worth that demand is expected to grow by more than 20% and the biggest driver of that growth is LNG, where many LNG exporters are interested in capacity further upstream to secure a more competitively priced.

And of our supply.

Power demand and exports to Mexico also provide opportunities, we're seeing incremental power demand from new pinker plants in Texas and conversions from coal to natural gas and that benefits, our existing business as well as provide future opportunity.

Tom will have more details on this in a minute.

We also see additional opportunities for renewable diesel on the west coast and are actively talking to customers about projects.

We're delivering according to the strategy, we laid out many years ago, one maintain a solid balance sheet. We ended the quarter at four one times continuing to make some cushion versus our four and a half times long term targets.

To invest in high return projects that we entirely funds.

Second quarter of 2022, we've added almost $1 $2 billion to the backlog and we continue to find good prospects and three return capital to our shareholders through a well covered dividend and opportunistic share repurchase.

We've retired $17 $1 billion to our shareholders over the last eight years, which is about 45% of our market cap.

That I will turn it over to Tom.

Thanks Kim.

Starting with our natural gas business unit transport volumes increased by 5%, which was about $1 9 million Deco terms per day for the quarter versus third quarter of 2022, driven by EPA in Gs line 2000 returned to service increased after Ellen.

LNG feed gas demand.

Increased power demand and increased industrial demand.

These increases were partially offset by decreased exports to Mexico.

Our natural gas gathering volumes were up 11% in the quarter compared with the third quarter of 22, driven by Haynesville volumes, which were up 23% Bakken volumes, which were up 13%.

Ford volumes were up 7%.

For the year, we expect gathering volumes to be up nicely, 16%, but about 4% below our plan driven primarily by a gross project delays and an asset sale.

As you can see from the overall growth in transmission and gathering volumes the gas markets continues to be robust.

Power demand was particularly notable this quarter, we set a new network peak demand a record of $11 1 million <unk> per day on August 24.

And monthly total demand records, both in July and August at 935, and 981 million barrels per day, respectively.

16 over 'twenty highest all time network power demand days occurred this quarter.

These statistics reinforced the critical role that our natural gas pipelines and storage assets play in support of the power sector.

And our products pipelines segment refined products volumes were up slightly for the quarter versus third quarter 'twenty two.

Celine volumes were up 1%, while diesel volumes were down 2% from the comparable quarter last year.

Diesel volumes continue to be lower primarily in California, as they are growing or newsom renewable diesel volumes displacing conventional diesel where initially transported by methods other than pipeline.

However, the reduction in conventional diesel volumes does does not reflect the true economic picture for us.

The Rd hub projects, we placed in service earlier this year are largely underpinned with take or pay contracts.

So we get paid most of our revenue even if the volumes do not flow.

That said renewable diesel volumes on our pipelines have been ramping up considerably since the guarding hubs came online up from 700, a day in Q1 of this year to 24000 a day in Q3.

Overall jet fuel volumes increased 5% for the quarter versus third quarter 'twenty two.

Crude and condensate volumes were up 5% in the quarter versus third quarter, 'twenty, two driven by higher Bakken and Eagle Ford volumes.

In our terminals business segment, our liquids lease capacity remains high at 95%.

Excluding tanks out of service for required inspections, approximately 96% of our capacity with the lease.

Utilization at our key hubs at Houston ship Channel and New York Harbor strengthened in the quarter versus third quarter 'twenty two.

And we continue to see nice rate increases in those markets as the fundamentals improve.

Our Jones Act tankers were at 98% leased through 2024, assuming likely options are exercised.

Bulk side overall volumes were down 5% third quarter 22, primarily from lower coal mining and metals tonnage, partially offset by increases in pet pet Coke in soda ash.

Grain volumes have minimal impact on our financials, though results so excluding graeme or bulk volumes were down about 3%.

Financial results benefited from rate Escalations in the quarter.

The C O two segment experienced lower overall volumes and prices on Ngls to an oil production versus the third quarter 'twenty. Two overall oil production decreased by 2% from the third quarter last year, but was above our plan for this quarter.

For the year, we expect net oil volume to exceed our plan largely due to better than expected performance from projects as well as strong volumes post the February outage at sidewalk do you.

These favorable volumes relative to the 23 plan to help offset some of the price weakness that we've experienced.

With that I'll turn it over to David Michael's Alright, Thanks, Tom.

So for the third quarter grew to three.

We're declaring a dividend of <unk>.

28, and a quarter cents per share, which is $1 13 per share annualized or 2% up from last year's dividend.

Before I get into the quarterly performance a few highlights we.

We've continued with our opportunistic share repurchase program as Kim mentioned, bringing our year to date total repurchases to $28 5 million shares.

At an average price of $16 58 per share, creating very good value for our shareholders.

We ended the third quarter with a net debt to adjusted EBITDA of $4, one times, which leaves us with good capacity and our leverage target of around four five times, despite $472 million upon budgeted share repurchases during the year.

And while as Kim mentioned, we are forecasting to be slightly below budget on a full year DCF and EBITDA more than all of that can be explained by lower than budgeted commodity prices. Meanwhile, we continue to see better than budgeted performance in both our natural gas and terminals businesses.

Now onto the quarterly performance, we generated revenues of $3 $9 billion, which is down five down from $5 2 billion in the third quarter of 2022, which is down $1 3 billion cost of sales was also down $1 3 billion and that is due to the large decline in commodity prices.

From last year to this year.

As Youll recall, we entered into offsetting purchase and sales positions in our Texas intrastate natural gas pipeline system and that results in our effective take or pay transportation service, but it leaves our revenue and cost and sales both exposed to price fluctuations.

While mainline. Meanwhile, our margin is generally not impacted by price.

Interest expense was higher versus 2022, as we expected driven by the higher short term rates, which impacted our floating rate swaps.

We generated net income attributable to <unk> of $532 million down 8% from the third quarter of last year. Our earnings per share was 24, which is one <unk> down from 22.

Our adjusted earnings was $562 million down, 2% compared to the third quarter of 'twenty two.

And our adjusted EPS was flat with last year, excluding the.

The impact from interest expense, we would have been favorable to last year.

And our share count was down $23 million or 1% versus the third quarter of 2002 due to our share repurchase efforts.

On our business segment performance improvements in our natural gas terminals and products segments, which were all up were partially offset by lower contributions from our <unk> segment.

Favorable natural gas segment performance was driven by greater sales margin on our Texas intrastate system favorable rates on re contracting at our mid continent Express pipeline as well as contributions from <unk> and.

And those were partially offset by unfavorable re contracting impacts on our south Texas access.

Our product pipeline segment was up due to unfavorable pricing impacts in the second quarter of last year as well as rate escalation.

Escalations across multiple assets our terminals segment was up mainly due to improved contributions from our Jones Act tanker business and.

An expansion project contributions.

Our <unk> segment was down due to lower <unk>, and NGL price and volume as well as higher power costs.

And those were all partially offset by contributions from our renewable natural gas business.

Our adjusted EBITDA was $183 5 billion for the quarter up 3% from last year.

DCF was 1.094 billion down 2% from last year.

And our DCF was 49 equal to last year again, excluding interest expense, we were favorable to last year.

Moving onto our balance sheet, we ended the third quarter with $39 billion of net debt.

Our net debt decreased $9 million since the beginning of the year and on a year to date basis. The reconciliation is as follows.

We generated one.

$1 7 billion of cash from operations, we've paid out $1 9 billion in dividends.

Also funded $1 85 billion and total capital expenditures and that includes growth sustaining.

And contribution to <unk>.

And.

Settled through the third quarter, we had stock repurchases of $389 million that gets you pretty close to the 9 million change in net debt year to date.

Okay.

And I think David on the share count came in it was down 23 million shares.

That's right.

Okay with that we will take questions. Yeah. One is ensure turn to ask question.

Limited to one and a follow up.

Consideration of others waiting in the queue.

Welcome to get back in line.

You have additional questions after that.

So.

Operator, Michelle would you please open it up for questions.

At this time, if you would like to ask a question you May press Star one.

I meant your phones and state your first and last name and prompted to withdraw. Your question you May Press Star two one moment. Please.

Jeremy Tonet with J P. Morgan you May go ahead Sir.

Hi, good afternoon.

Well Jeremy.

Just wanted to start off with a high level question, if I could and just coming back to some of the commentaries you said in the past given that the business has worked through a lot of I guess adverse contract rolls and other kind of headwinds or in the past.

Think about the current portfolio, how do you think the EBITDA growth generation is for this asset base do you see this is low single digit EBITDA growth mid single digit EBITDA growth or any other I guess a framework that you could provide for us would be helpful.

Sure.

So I think we will go through our 24, a budget and the next.

Oh, six weeks or so I think that'll give us a better idea for 2024 budgets.

You know at a high level, you're right that we have had some contract rollover. We we published a fair game for the last couple of years in our analyst Conference.

And we stopped doing that because the headwinds with respect to rollover.

Et cetera, we're not we're no longer material so I.

I think the network and natural gas as you know the pipes. That's held up average utilization has gone much higher you know that allows you to charge higher rates that also means that your customers need ancillary services.

Storage rates have increased significantly so we're able to charge more for storage obviously on.

Please unmute your phones and state your first and last name and prompted. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Our contracts and products and terminals, we have inflation escalators.

Michelle: It is now my pleasure to turn the conference over to Mr. Rich Kinder, Executive Chairman of Kinder Morgan. Sir, you may begin. Okay, thank you, Michelle. And before we begin, I'd like to remind you as usual that KMI's earnings released today in this call includes forward-looking statements within the meeting of the Private Security's litigation reform act of 1995, and the Securities Exchange Act of 1934, as well as certain non-gap financial measures.

Help with helped increase the EBITDA in those businesses and we've seen some nice rate increases, especially as a result of improving markets on the terminal side, especially in the New York Harbor.

Michelle: Before making any investment decisions, we strongly encourage you to read our full disclosures on forward-looking statements and use of non-gap 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 come as actual results to differ materially from those anticipated and described in such forward-looking statements.

And so those businesses are.

Who have some have some nice tailwind I think and C. O. Two obviously the forward curve right now is that it's a little bit below where we are right now, but I think on average it is above where we have been.

24 curve is above 2023.

Rent prices and 2020 or about 23 right now we want it we will.

Have these projects that are in service. So I think we have a lot of tailwind.

Rich Kinder: In my remarks at the beginning of our second quarter investor call, I talked about future demand for natural gas, and why that makes us bullish about the future of KMI. The biggest portion of that growth in demand is affordable to LNG. So, let me follow up on this call by reviewing the latest estimates regarding future US speed gas demand to serve the country's LNGS. S&P Global Commodity Insights estimates LNG speed gas demand at 13.1 BCF a day for 2023, and projects that it will grow to 24.7 BCF a day in 2028 and 27.5 BCF a day in 2023.

Coming in this business I'd say the one thing that we have to manage is just the regulatory environment, which you know we've seen increase over the last last couple of years and so those are things wall will address as we go to the 2020 for budget.

But.

We've got a lot of project opportunities also oil and gas to.

A lot of which we have added to the backlog, but there are still many many more that aren't in the backlog yet.

I went through some of those in my opening commentary so it's hard to boil it all down to two a rate until we get very specific on numbers.

But I think you know in terms of the tail winds right now are very nice.

Rich Kinder: IEA estimates that US LNG exports, as a share of global LNG supply, will grow from 20% in 2022 to almost 30% in 2026. All of these numbers demonstrate incredible growth, which is driven, of course, by new LNG export facilities, and benefit most of which are currently under construction.

Got it that's helpful. Thanks for that and maybe just kind of pivoting gears, a little bit here towards our capital allocation and see that the leverage is still at four one which I think is below the long term target here and it seems like most of the buybacks had been done below $17 and so when you think about capital allocation do you think this.

Buybacks below 17 send a message to the market on how management thinks about the value of the stock or do you see more value in retaining dry powder for acquisitions or growth Capex. Just wondering if you could update us on your thoughts there.

Rich Kinder: Now, how does this increase demand affect the mid-stream energy segment and specifically Kendrick Morgan? To meet this increased speed gas demand, the country is going to need additional pipelines and not just header pipelines to the export terminals, but also significant expansion of the pipeline infrastructure upstream from those header systems and terminals. While we believe Haynesville production will grow to supply a portion of this demand, because of its proximity to the LNG facilities in Louisiana and Southeast Texas, it will not be able to fulfill all these growth volumes and additional take away capacity for multiple basins will be required.

I mean, I think that what where we have our our returns out with respect to projects is as we've stated a lot of times is in the mid teens.

And we can move up and down from that depending on the rest of the project and so you know.

Those are going to be.

Very nice returns.

And well above our cost of capital and so the priority when we have when we have our target returns are sat at that threshold.

Rich Kinder: Access to multiple basins is also important to help solve the excess nitrogen problem concerning LNG export facilities. While there are other mid-stream players will also benefit, we think Kendrick Morgan, which is currently transporting a little less than half of all US LNG feed gas, is an excellent position to take advantage of this tremendous opportunity because of the extensive footprint of our pipeline network, particularly in Texas and Louisiana, where so much of the additional demand will occur.

Are gonna take priority over share repurchase that being said when we have excess cash flow and we will do opportunistic share repurchase and so we don't have unlimited cash flow to do share repurchases until we want to make sure that when we do those were getting a very attractive price.

Got it I'll leave it there thank you.

Okay.

Thank you our next caller is Jean Ann Salisbury with Bernstein, you May go ahead.

Kimberly Dang: And with that, I'll turn it over to Kim and the team. Thanks, Rich. I'll make a few overall points and then I'm going to turn it over to Tom and David to give you more details.

I am I think mine are very calm and I know you've talked about on prior calls about rates for gas storage rising and getting close to $3 and I wanted to understand how much. It can is 700 Bcf and storage should eventually be able to reset up to these higher rates and the timeline of that occurring.

Kimberly Dang: We had a solid quarter financially. We continued to find opportunities to add to our backlog. We repurchased $73 million in shares at an average price of $16.77. That brings us to $472 million of share repurchases here today at a very attractive price of $16.58. Financially, our portfolio of assets performed well with contributions from the segments up by percent driven by increases in natural gas products and terminals. Products had a particularly strong quarter up 22%.

Yeah, I mean, I'll give you a high level and then let people step out a.

More clarity, but yeah, I mean much of it.

Capacity is a single cycle reservoir storage.

Smaller percentage of that is salt storage, which is really what the multi cycle storage facilities, which.

Garner those higher rates.

As you know part of our storage as a regulated services. So there's limits as to what rate increases we can charge for those.

Kimberly Dang: Overall, our results were largely flat because of increased interest expense and sustaining catbacks, which we anticipated in our budget. For the year versus our budget, our expectations remain the same as what we communicated in the last quarter, slightly below our guidance, which can all be attributed to lower commodity prices. Versus the guidance we gave you last quarter, we have seen some benefit from improved commodity prices, but that was largely offset by other moving pieces, for example, delays in our ETV projects, all netting to leave us approximately in the same place for the full year that we discussed with you last quarter.

Those services, but what we're saying in those instances, we're getting much longer term.

And.

We also have also as you know Paul services, which are you know another way, where we can extract additional value.

That may not be limited.

Limited by regulated regulatory caps.

And so you know it's hard to put a number to answer your question, but you.

We do think whether it's through salt service that we sell fee for service or these opportunistic power services, both short term and long term, but we do.

Kimberly Dang: We continue to see good opportunities to add to the backlog and were able to more than offset the projects that went into service with new additions. The backlog now stands at $3.8 billion with an average multiple of 4.7 times, and we see opportunities beyond the backlog, especially in natural gas. As Rick said, demand is expected to grow by more than 20% and the biggest driver of that growth is LNG, where many LNG exporters are interested in capacity further upstream to secure more competitively price and diverse supply.

As well as getting additional duration on our single cycle storage services, we're getting additional value out of this growing trend in.

In storage.

That makes sense.

Okay.

Great and my other question was about the Wyoming Interstate projects that I saw it in the release and is that basically just using currently unused capacity and work for the 400 M. P. F. D. I was wondering if there was any material capex associated with that are you.

You know you just start meeting club an empty pipeline.

This is a sequel.

Kimberly Dang: Power demand and exports to Mexico also provide opportunities. We're seeing incremental power demand from new-peaker plants in Texas and conversions from coal to natural gas, and that benefits our existing business as well as provides feature opportunities, and Tom will have more details on this in a minute. We also see additional opportunities for renewable default on the West Coast and are actively talking to customers about projects.

So really from a kinder standpoint, we've got some minimal capital mostly interconnect capital we've been working with our partners for a long time on this.

No, we see Bakken <unk> rising significantly.

This is an example of a collaborative project that maximizes infrastructure.

In existence today and on our side very little capital.

Great. That's all for me thanks.

Thank you our next caller is Brian Reynolds with UBS you May go ahead Sir.

Kimberly Dang: We're delivering according to the strategy we laid out many years ago. One, maintain a solid balance sheet. We ended the quarter at 4.1 times, continuing to maintain some cushion versus our four and a half times long-term target. Two, invest in high-return projects that we internally fund. Since the second quarter of 2022, we've added almost $1.2 billion to the backlog, and we continue to find good prospects. And three, return capital to our shareholders through a well-covered dividend and opportunistic share repurchase.

Hi, good morning, or good afternoon, everyone, maybe to start off a little high level you know on Kinder is positioning to support this 20% increase in natural gas demand by 2028 that you put in the release.

Seems like Kinder is well positioned for this growth, but we could see capex trend higher of that one to 2 billion range. So you know if some of these projects that are helping debottleneck, the Texas, Louisiana corridor, Gtx expansion and potential more Permian Greenfield that's needed just kind of curious high level. You know can you talk about the opportunity set that Kinder has you know just given kinder.

Kimberly Dang: We've returned $17.1 billion to our shareholders over the last eight years, which is about 45% of our market cap.

Prior comments of looking to maintain that 50% market share around LNG supply going forward. Thanks.

I'll make a I'll make a couple of high level comments about the opportunity set and then say, it's all on Tom Ken can add in.

Tom Martin: With that, I'll turn it over to Tom. Thanks, Kim. So starting with the natural gas business unit, transport volumes increased by 5%, which is about 1.9 million deck of terms per day for the quarter versus third quarter of 2022. Driven by EPA and G's, line 2000, return to service, increased natural energy, feed gas demand, increased power demand and increased industrial demand. These increases were partially all set by decreased exports to Mexico.

I think you know, there's there's multiple opportunities on the LNG front, so you've got you've.

You've got the next decade down in South Texas.

It's going to require incremental pipeline infrastructure, probably you've got multiple facilities coming and you know along the along the Texas, Louisiana border and does a lot of some of those have existing had our pipe some of them don't some of them are wanting to reach further back.

Tom Martin: Jessica, Our natural gas gathering volumes were up 11% in the quarter compared to the third quarter of 22, driven by Hainesville volumes which were up 23%, Balkan volumes which were up 13% equal for volumes were up 7% for the year we expect gathering volumes to be up nicely 16% but about 4% below our plan driven primarily by egress project delays and an asset sale. As you can see from the overall growth in transmission and gathering volumes the gas markets continue to be robust power demand was particularly notable this quarter we set a new network peak demand a record of 11.1 million deck of terms per day on August 24 and monthly total demand records both in July and August of 9.35 in 9.81 million deck of terms per day respectively.

As a result of the sucking sound of LNG on the on the Gulf Coast, you have a southeast market that a short supply and so there's opportunities to try to expand pipeline capacity and to the southeast to help meet some of the demand there.

There is opportunities for exports to Mexico, I think they are building a number of new power plants, which don't have supply at some of that's out on the on the West coast of Mexico, So theres opportunity to serve that new power plant. Although there's also LNG facilities that are going.

On the West Coast.

Of Mexico, and so there's incremental opportunity there and.

In California, they've just announced that they are extending the life of their natural gas facilities and they are increasing the capacity of Aliso Canyon and so on.

I think people are understanding that natural gas is going to it's going to play.

Tom Martin: 16 of our 20 highest all time network power demand days occurred this quarter. These statistics reinforce the critical role that our natural gas pipelines in storage assets play in support of the power sector. In our products pipeline segment we find products volumes were up slightly for the quarter versus their quarter 22 gasoline volumes were up 1% while diesel volumes were down 2% for the comparable quarter last year. Diesel volumes continue to be lower primarily in California as they're growing renewable diesel volumes displacing conventional diesel were initially transported by methods other than pipeline.

A big role for a longer period of time then.

And then what are some people out there previously thought were saying as you know Tom talked through all the power demand, we're still seeing some coal conversions to natural gas, which is is driving which is driving demand.

And then there's industrial growth on the on the Texas Gulf Coast and so I think there are number of there are a number of different factors driving the growth, but I think most of it is in the southern market.

It's really hard to get infrastructure built into the northeast and so woodmac shows 90% to 95% of the demand growth in natural gas occurring in Texas and Louisiana.

Tom Martin: However, the reduction in conventional diesel volume does reflect does not reflect the true economic picture for us. As the already hub projects replaced in service earlier this year are largely underpan with takeer pay contracts. So we get paid most of our revenue even if the volumes do not flow. That said renewable diesel volumes on our pipelines have been ramping up considerably since the already hubs came online up from 700 a day in q1 of this year to 24,000 a day in q3.

I think the only thing I'll add to that.

When you think about the competitive landscape.

Oh.

We're heavily competitive right and so I think what differentiates us.

As our network I think will bring to the table is our on system storage are balancing capabilities and then and then more recently, we've been focused on expanding our ability to aggregate nitrogen and I think that's what's going to help differentiate us from the competition.

Tom Martin: Overall, jet fuel volumes increased 5% for the quarter versus third quarter 22. Food and condosate volumes were up by a percent the quarter versus third quarter 22 driven by higher bottom in equal to volumes. In our terminals business segment our liquids lease capacity remains high at 95% excluding tanks out of service for required inspections approximately 96% of our capacity of lease. Utilization at our key hubs at Houston ship channel and the Ark Harbor strengthened in the quarter versus third quarter 22.

Yeah. The other thing I'd say is that helps differentiate us. The fact that we can provide shippers with multiple different outlets.

So if an LNG ship are in the international markets change and chefs go somewhere else.

We can give them the pipeline system that we have can help them redirect those flows if.

If they have storage service into storage, but if they don't have storage service to other markets.

Great. Thanks for all of that maybe as my follow up to touch on the just the Capex backlog build multiple it's got a lot of focus over the previous few quarters. So you know it seemed to trend a little bit higher this quarter, you know with an increased of the backlog as well. So just kind of wondering if you could talk about the moving pieces there, whether it's new projects driving it or whether the rising rate environment is happening.

Tom Martin: And we continue to see nice rate increases in those markets as the fundamentals improve. Our Jones Act tankers were 98% lease through 2024 assuming likely options or exercise. On the bulk side overall volumes are down to 5% from the quarter 22 primarily from lower coal, grain and metals tonnage partially offset by increases in pet coke and soda ash. Brain volumes have minimal impact on our financial results, so excluding grain are both volumes are down about 3%.

Impact on future returns any color would be helpful. Thanks sure absolutely. So one let me start with the fact that we talked a little bit about this last quarter that you know.

The backlog multiple is not our focus what we focus on is the return on projects and so you know and we were on a long term cash flow and.

Tom Martin: , Financial Results, Benefited from Rate Escalations in the Quarter. The CO2 segment experienced lower overall volumes and prices on NGL, CO2 and oil production versus a third quarter 22, overall oil production decreased by 2% from a third quarter last year but was above our plan for this quarter. For the year, we expect net oil volume to exceed our plan largely due to better than expected performance from projects as well as strong volumes post the February outage at Sackbox.

I'm, a terminal value or not.

And assume a renewal or a parcel or new or not and and four for you guys. What we do in the backlog as we just look at park theory about Dol and Trans Atlantic that into a multiple to try to help you understand sort of what these projects are going to generate but the way so.

All I'm, saying is that.

The multiple may move up or down on the backlog and these are still very attractive projects. So it's not like we only do projects that come into the backlog at three times.

Tom Martin: These favorable volumes relative to the 23 plan help offset some of the price weakness that we've experienced with that alternative of David Michels.

What's kind of a mid teens average unlevered IRR, and we're adjusting up or down for about slightly based on cash flow risk, but this quarter. What we saw was the are the projects that went into service were about roughly three times multiple.

David Michels: All right, thanks Tom.

David Michels: For the third quarter 23, we're declaring a dividend of 28 and a quarter cents per share, which is $1.13 per share annualized or 2% up from last year's dividend. Before I get into the quarterly performance, few highlights. We've continued with our opportunistic share research program, as Kim mentioned, bringing our year-to-date modal repurchases to 28 and a half million shares at an average price of 16 and 58 per share, creating very good value for our shareholders.

<unk> that we placed into the backlog so that they added projects were about a four times multiple.

And then all one of the existing projects in our backlog we decreased that the year, one EBITDA and the reason we did that was.

David Michels: We ended the third quarter with net debt to adjust the EBITDA 4.1 times, which leads us with good capacity in our leverage target of around 4.5 times, despite $472 million of un-budgeted share repurchases during the year. And while, as Kim mentioned, we are forecasting to be slightly below budget on full-weared DCF in EBITDA. More than all of that can be explained by lower than budgeted commodity prices. Meanwhile, we continue to see better than budgeted performance in both our natural gas and terminals business.

Because we think that project is going to take a little longer time to ramp and to the EBITDA and so we will get we think we will get to the EBITDA that was in the backlog. It just won't happen until later in time it won't be your want them now even if we never ramped on that project that project.

It's still a very attractive return and I think we feel pretty good that we are going to add incremental volume there.

Great makes sense I'll leave it there enjoy the rest of your evening. Thanks.

Our next caller is Tristan Richardson with Scotia Bank.

David Michels: Now, onto the quarterly performance. We generated revenues of $3.9 billion, which is down from $5.2 billion in the third quarter of 2022, which is down $1.3 billion. Coffee sales was also down $1.3 billion, and that is due to the large decline in commodity prices from last year to this year. As you recall, we entered into offsetting purchase and sales positions in our Texas interest state natural gas pipeline system, and that results in an effective take or pay transportation service, but it leaves our revenue and cost and sales both exposed to price fluctuations, while meanwhile our margin is generally not impacted by price.

Hey, Justin.

Hey, good morning.

Yeah. Good evening just.

<unk> Kim I guess, just given the growth you guys are seeing in the core transport business and certainly volumes are growing midstream, but as you said volumes are a little below plan that you guys are working on asset sales I mean, do you see midstream continuing to contribute less the business, maybe as a percent over time, especially as we kind of look into next year.

And so when you say midstream are you are you you're separating out.

The gathering and processing from all the Texas Intrastate business, which is also in midstream.

Correct.

Focused on gathering and processing.

David Michels: Interest expense was higher versus 2022, as we expected, driven by the higher short-term rates, which impacts our floating rate swaps. We generated net income attributable to KMI of $532 million down $8.00 from the third quarter of last year. Our earnings per share was 24 cents, which is $1.00 down from $22.00. Our adjusted earnings was $562 million down 2% compared to the third quarter of $22, and our adjusted EPS was flat with last year. Excluding the impact from interest expense, we would have been favorable to last year. And our share count was down $23 million, or 1% versus the third quarter of $22.00. We do our share repurchase that.

Yeah.

The gathering and processing is going to decrease as a percentage of the overall business.

I I don't know the answer to as a percentage of the overall business what I can tell you.

I don't anticipate that gathering and processing the EBITDA from gathering and processing on the natural gas side.

Is going down.

Because we were growing natural gas demand is growing and we're going to continue to need more natural gas molecules and our biggest position is in the haynesville and in the Eagle Ford and those are two places that are very close to the LNG demand and as rich unsafe or Ed mentioned, you know Eagle Ford has.

A gas has some very nice characteristics and that it has low nitrogen and so I think that you know I think I would continue to expect to see growth and the.

David Michels: Roberts. On our business segment performance improvements in our natural gas terminals and product segments, which were all partially offset by lower contributions from our CO2 segment. The favorable natural gas segment performance was driven by greater sales margin on our Texas interest rate system favorable rates on re-contracting at our midcontinent express pipeline, as well as contributions from ETNG. And those were partially offset by unfavorable re-contractors impacting on our South Texas access. Our product pipeline segment was up due to unfavorable pricing impacts in the second quarter of last year, as well as rate escalation, escalations across multiple assets.

<unk> coming out of those basins.

Hum.

I think the relative comparison.

Yeah, we have to secure some of these large projects you might see a differential and overall percentage, but I think Kim.

When you look at our our gathering and processing systems.

And constrained Eagle Ford approaching full processing capacity.

And then the Haynesville, where we're trying to keep up and so I think.

That trend will continue as we see these LNG facilities come on and then as far as the proportionate relative proportion of it all depends on if we're successful in getting these big LNG theater projects in a loss and those are obviously material.

David Michels: Our terminal segment was up mainly due to improved contributions from our GUNZAC tanker business and expansion project contributions. Our CO2 segment was down due to lower CO2 and NGL price and volume, as well as higher power costs, and those were all partially offset by contributions from our renewable natural gas business. Our adjusted EBITDA was 1.835 billion for the quarter, up 3% from last year. Our DCFO was 1.094 billion down 2% from last year, and our DCFO was 49 cents equal until last year. Again, excluding interest expense, we were favorable the last year.

So on the on the Haynesville being constrained and that means there's going to be opportunities for new projects is that as that volume increases on the processing capacity.

That.

Being at capacity on processing in the Eagle Ford.

There may be there may be opportunities to charge incremental rate there. So just to clarify what particular site.

I appreciate it and then quick follow up just on the energy transition.

This adventure side, maybe top of the funnel commercial activity, you're seeing around R&D. So you just a sense of overall.

David Michels: Moving on to our balance sheet, we ended up at the third quarter with $30.9 billion of net debt. Our net debt has decreased $9 million since the beginning of the year, and on a year-to-day basis, the reconciliation has followed. We've generated 4.07 billion of cash from our operations. We've paid out $1.9 billion in dividends. We've also funded 1.85 billion in total capital expenditures, and that includes growth, sustaining, and contributions to JVs.

Potential capacity projects out there, particularly as you get past 2024 and arm Hills comes online.

David Michels: And settled through the third quarter, we have stock repurchases of $389 million. That gets you pretty close to the $9 million change in that debt year-to-day basis. And I think David on the share cap, you meant it was down 23 million shares.

Yes.

Hey, Joe Smith Anthony.

Yeah. So as we look 'twenty 'twenty four and beyond we do have some additional projects within the North American.

Naturel acquisition and landfill gas to electric projects, which are potential R&D conversion opportunities and so now we're got a little bit more clarity from the EPA on the <unk> potential we are now looking at that as a potential projects again.

I have a few other ones I would say that we're looking at in terms of organic growth potential, but I'll focus has really been getting.

Michelle: Okay, with that, we will take questions. When it is your turn to ask questions, you'd limit it to one and a follow-up consideration of others waiting in the queue. But you're welcome to get back in line if you have additional questions after that.

Getting our existing projects up and then service and operating well.

Well and going through the wind generation, but a process, but yes, we do have some potential opportunities beyond all the mills.

And just on the on the facilities I mean for an update there.

Two of the three that were bringing in service this year.

Michelle: So operator, Michelle, would you please open it up for questions? Thank you. At this time, if you would like to ask a question, you may press star one.

Our in service.

One we've had a few operational issues. We think we've largely worked through the other one is ramping up and the third one we expect to be on by the end of the year.

Michelle: Please admit your phones and state your first and last statement prompted to withdraw your question. You may press star two. One moment, please.

I appreciate the update thank you Kim.

Jeremy Tonet: Jeremy, tonight, well, JP Morgan, you may go ahead, sir. Hi, good afternoon. Hello, Jeremy. I just want to start off with a high-level question, if I could, and just coming back to some of the commentaries they said in the past, given that the businesses worked through a lot of, I guess, adverse contract roles and other kind of headwinds are in the past. If you think about the current portfolio, how do you think the EBITDA growth generation is for this asset base?

Thank you. Our next caller is Neal Dingmann with two Securities you May go ahead.

Jeremy Tonet: Do you see this as low single-digit EBITDA growth, mid single-digit EBITDA growth, or any other, I guess, framework that you could provide for us would be helpful. Sure. So I think we will go through our 24 budget in the next month, six weeks or so. I think that will give us a better idea for 2024. But just, you know, at a high level, you're right that we have had some contract growovers.

Afternoon all.

Talked a bit about M&A I guess my question is just perhaps on near term M&A I'm. Just wondering how you all would think about potentially added natural gas pipelines. Various other assets I'm. Just wondering given your current footprint is is there a preference or are you just sort of agnostic on looking at various assets.

I think that you know acquisitions are easy to imagine and hard to do and so.

I think that it's more acquisitions or more opportunistic as what I would say for the most part and yes. We are always interested in acquisitions and have been sometimes option and we have a a pretty disciplined process around looking at it yeah.

There are there are three criteria that.

Jeremy Tonet: We published those for you for the last couple of years in our analyst conference. And we stopped doing that because the headwind returns with respect to rowovers, etc. We're no longer material. So, you know, I think the network and natural gas, as you know, the pipes have filled up. Average utilization has gone much higher. You know, that allows you to charge higher rates. That also means that your customer needs to need ancillary services storage rates have increased significantly.

Our our core for us to do acquisition. One you know the asset has to fit our strategy. So it needs to be fee base, you know energy infrastructure.

Two it needs to have the right attractive economics around it which means it needs to be accretive to DCF per share and have an attractive unlevered after tax returns.

And three it can't be you know, we prefer that it not be dilutive to our long term debt metric of four and a half times debt to EBITDA and generally I don't think we would do something that is dilutive to that that metric. It would have to be something that was very very special.

Jeremy Tonet: So we're able to charge more for storage, obviously, on our contracts and products and terminals. We have inflation escalators, which help with help increase the EBITDA in those businesses. And we've seen some nice rate increases, especially as a result of improving markets on the terminal side, especially in the New York Harbor. And so those businesses have some nice tailwind. I think in CO2, obviously the forward curve right now is that it's a little bit below where we are right now.

Okay, No that all makes sense and then Kim I think you mentioned are you you mentioned something about the RIN price and I'm. Just wondering did you say you saw this increase and or maybe also could you speak to the direction of your of the D. Three wins.

On the D three events.

They have gone to $3 40 sets right now I think so you know they were below $2 before Jan when the EPA came out with the new RV as well post that they trade it in and around three box and in the last week or so we've seen them go up to $3.40.

And you know hard to pinpoint exactly what that is but you know think there may be people out there that haven't satisfied their 22 obligations, yet and that could be driving some of the 'twenty three pricing.

Jeremy Tonet: But I think on average, it is above where we have been. The 2024 curve is above 2023. I think rent prices in 2024, about 23 right now. We will have these projects that are in service. So I think, you know, we have a lot of tailwinds coming in this business. I would say, you know, the one thing that we have to manage is just the regulatory environment, which, you know, we've seen increased over the last couple of years.

I think you know rent prices right now look a look pretty good for 2024.

Yes, it sounds encouraging thank you.

Yes.

Thank you our next caller is Keith Stanley with Wolfe Research.

Hi, good afternoon.

Sorry, if I missed this but any.

Hey, any updated comments on the potential to expand Gulf Coast Express and where things are in discussions with customers and how soon that could move forward.

Jeremy Tonet: And so those are things for all rule of drafts as we go through the 2024 budget. But we've got a lot of project opportunities also on gas. To, you know, some, a lot of which we have added to the backlog, but there's still many, many more that aren't in the backlog yet. And I went through some of those in my opening commentary. So it's hard to boil it all down to a rate until we get very specific on numbers. But I think, you know, in terms, the tailwinds right now are very nice. Got it. That's helpful. Thanks for that.

And we continue to have discussions.

<unk> with customers and which is kind of where we were last.

Last quarter at this time and I think there are people that are interested in that.

But we don't have anything to announce yet.

Okay.

Second question just on the on the 20th twenty-three commentary of being slightly below plan.

It just it seems to me like the company was pretty much on budget in the first half of 2023 on the EBITDA line anyway, and Q3 meet maybe less than $50 million below budget. I mean are we talking when we're saying slightly below plan.

Jeremy Tonet: And maybe just kind of pivoting gears a little bit here towards capital allocation and see that the leverage is still at 4.1, which I think is below the long term target here. And it seems like most of the buybacks have been done below $17. And so when you think about capital allocation, do you think this buybacks below 17 send the message to the market on how management thinks about the value of the stock or the more value in retaining dry powder for acquisitions or growth capex just want to know if you could update us on your thoughts there.

Maybe even like less than 1% below the EBITDA target. It just it just seems kind of small with you guys, calling it out.

Yes, Hey, Keith its David.

Yes, it's that's why we said slightly below its not a material amount below which disappointing that we are below because we were having really strong performance across a number of categories and our base business the commodity price.

Jeremy Tonet: I mean, I think that when we have our returns set with respect to projects as we've stated a lot of times is in the mid teens. And we move up and down from that, depending on the risk of the project. And so, you know, those are going to be very nice returns. And well above our cost of capital. And so the priority when we have our when we have our target returns set at that threshold are going to take priority over share repurchase that being said when we have excess cash flow.

Impact is less impactful now that we've seen some improvement, but as we go through the year, we put on additional hedges and so forth. So we have less upside as the later part of the year improving commodity prices materialize and we've continued to have some some weakness in other parts of the business that offset some of that commodity price improvement.

Jeremy Tonet: And we will do opportunistic share repurchase. And so we don't have unlimited cash flow to do share repurchases. And so we want to make sure that when we do those, we're getting a very attractive price. Got it.

So net net it's unfortunately don't have additional detail for you with regard to the slightly determination, but it's disappointing that we're still a little bit down, but it's not much.

Okay. Thank you.

Yeah.

Thank you Gabe Moreen with Mizuho you May go ahead Sir.

Hey, good afternoon, everyone. Just a quick question on the.

Fixed to floating and then back to fixed hedges that you've got on some of which are expiring soon just wondering how you're thinking about that.

Jeremy Tonet: I'll leave it there.

Michelle: Thank you.

Jean Salisbury: Our next caller is Jean Anne Salisbury with Bernstein. You make go ahead. Hi, I'm I think minor for Tom. I know you've talked a bit on prior calls about rates for gas storage rising and getting close to $3. I wanted to understand how much of KMI's 700 BCF of storage should eventually be able to reset up to these higher rates in the timeline of that occurring. Yeah, I mean, I'll give you a high level and then let's see if we'll step in for more clarity.

Some of the hedges expiring in the not too distant future for interest expense for next year.

Jean Salisbury: But yeah, I mean, much of that that capacity is a single cycle reservoir storage, you know, a smaller percentage of that is salt storage, which is really what the multifacul storage facilities, which garner those higher rates. As you know, part of our storage is in regulated services. So there's limits as to what rate increases. We can charge for those those services, but what we're seeing in those instances, we're getting, you know, much longer term. And, you know, we also have also, as you know, pal services, which are, you know, another way where we can extract additional value that may not be, you know, limited by regulate regulatory caps.

So.

Have about 25% of I got that flows for 2023, we locked down.

About half of that so we are floating rate for 2023, it was about 13%.

Hedges that we put on in 'twenty three expire at the end of 'twenty three.

And so you would expect us to go back to 25%, but we do have swaps that roll off in 2023 and swaps that roll off in 2024.

Those swaps total $2 75 billion.

We have not made a decision yet as to whether we will put swaps back put swaps on when those expire.

Or are just stay fit say more facts, we would if we just let all those swaps expire did not put out any new swaps, we would be at 15 or 16% floating percentage.

You know the our long term strategy has been to float on a portion of our debt because the forward curve is generally overestimated future floating rates and so we've made a third last year, we made $1 $2 billion over the last 10 years on those swaps this year with.

Jean Salisbury: And so, you know, it's hard to put a number to answer your question, but I, you know, we do think whether it's through salt service that we sell fee for service or these opportunistic pal services, both short term and long term that we do, as well as getting additional duration on our single cycle storage services, we're getting additional value out of this growing trend in storage. That makes sense. Great. And my other question was about the Wyoming interstate projects that I saw in the release.

Gave back about 200 million. So we made about a $1 billion.

One exception to that we've seen in the charts to the forward curve over predicting a floating rates has been when you've been in a rate hike.

Our rate hike cycle.

And so I think we're going to be flexible as to when we put our new our new swaps back on so I think there's a reasonable likelihood that we may be at a lower floating percentage than 25% and 2024.

Jean Salisbury: Is that basically just using currently unused capacity on WIC for the 400 and then CFC? I was wondering if there's any material caps associated with that or it's just, you know, you just start moving club on MC pipeline. This is a sequel. So really from a kinder standpoint, we've got the minimal capital, mostly interconnect capital. We've been working with our partners for a long time on this. You know, we see back in GRs rising significantly. This is the collaborative project that maximizes infrastructure that's in existence today. And on our side, very little capital. Great. That's all for me. Thanks. Thank you.

And may wait for a period of time to put some new swaps back on.

But in the future and the longer term, we may decide to put some of those swaps back on but I know of that though I think we would go above the 25%.

Thanks, Kim and then maybe if I can follow up with another question around the LNG opportunity in weather.

Kinder Morgan fuses and need to perhaps to more of a marketing presence outside the entrust staged aggregate supply for some movies.

Brian Reynolds: Our next color is Brian Reynolds with UBS. You may go ahead, sir. Hi.

Brian Reynolds: Good morning, or good afternoon, everyone. Maybe to start off a little high level, you know, on Kinders positioning to support this 20% increase in natural gas demand by 2028 that you put in the release. You know, it seems like Kinders well positioned for this growth, but we could see CapEx trend higher of that one to two billion range. So, you know, some of these projects that are helping de bottleneck the text Louisiana corridor or GCX expansion.

Pipeline opportunities around LNG and similarly, whether there's any thought to taking stakes in LNG export facilities yourself, that's supposed to sort of marry up to an integrated approach.

Yeah. So we actually do have a a small guest marketing.

Brian Reynolds: The potential more premium greenfield that's needed just kind of curious high level, you know, can you talk about the opportunity sets that kinder has, you know, just given Kinders prior comments of looking to maintain that 50% market share around LNG supply going forward. Thanks.

Business right now and not really focused on LNG opportunities exclusively but really just opportunities across the domestic market.

Rich Kinder: Yeah, I'll make a couple of high-level comments about the opportunity set, and then Sital and Tom can add in. I think there's multiple opportunities on the LNG front, so you've got the next decade down in South Texas, so that is going to require incremental pipeline infrastructure probably. You've got multiple facilities coming in along the Texas Louisiana border, and some of those have existing header pipes, some of them don't, some of them are wanting to reach further back.

Largely off of our assets you know, we'll see if there's incremental opportunities there we may consider that.

That as you suggest but I mean you.

You know, we don't I don't see us going into an international market.

It really hasn't been.

Our footprint in our our strategy.

But you know.

We will be open to consider things as opportunities develop and we'll see where things go from there as far as our own LNG are taking space out of them in our LNG facilities again, you know, there's a lot of capital and a lot of risk related to doing that and so we have tended to be more fee for service.

Rich Kinder: As a result of the sucking sound of LNG on the Gulf Coast, you have a Southeast market that is short supply, and so there's opportunities to try to expand pipeline capacity into the Southeast. To help meet some of the demand there, there is opportunities for exports to Mexico. I think they're building a number of new power plants, which don't have supply yet. Some of that's out on the West Coast to Mexico, so there's opportunity to serve that new power plant load.

Provide LNG, both capacity transportation capacity and as it pertains to Elba Island, you know our export facility for our customers to play in the international markets.

And I don't see that changing much if at all.

Thanks, Tom.

Thank you our next caller is that than ever with D. P. H and company. Please go ahead Sir.

Thanks for taking my questions just wanted to go back up to the Bakken after seeing the announcements on the gas side have you guys looked into or considered converting the double H pipeline to an NGL pipe to help that.

Rich Kinder: There's also LNG facilities that are going on the West Coast of Mexico, and so there's incremental opportunity there. In California, they've just announced that they're spending the life of their natural gas facilities, and they're increasing the capacity of Aliso Canyon, so I think people are understanding that natural gas is going to play a big role for a longer period of time. Then what some people out there previously thought, we're seeing as Tom talked through all the power demand, we're still seeing some coal conversions to natural gas, which is driving demand, and then there's industrial growth on the Texas Gulf Coast.

Some of the takeaway options up there.

Yeah.

We have yeah we've.

This is dax we've looked at.

Several different options for repurposing that that being one of them and where you're you know we continue to transport crude on the pipe.

Coming more largely a we've got about 30, a day a residual contracts on that.

You know, it's becoming as those contracts roll, it's becoming more of a basis pipeline.

Which obviously has an incremental element of risk around it but that's certainly something we would consider a with the right deal.

Rich Kinder: I think there are a number of different factors driving the growth, but I think most of it is in the southern market, it's really hard to get infrastructure built into the Northeast. Woodmax shows 90 to 95 percent of the demand growth in natural gas occurring in Texas and Louisiana. I think the only thing I'll add to that, when you think about the competitive landscape, we're heavily competitive, and so I think what differentiates us is our network.

Gotcha and then if you were to convert that we assume it's a similar capacity with Ngls and are there any opportunities to it.

Now expand that at all if you were to go that route.

Yes.

It depends on what you put it in but.

Ultimately I think if it is still in liquid service, if you do Ngls, maybe a little bit more capacity.

Got bags, but.

Still early.

Yeah, It's just like anytime we have an underutilized asset we're looking for other opportunities to utilize that I think this one's pretty early.

Rich Kinder: What we'll bring to the table is our on-system storage, our balancing capabilities, and then more recently we've been focused on expanding our ability to aggregate nitrogen, and I think that's what's going to help differentiate us from the competition. The other thing I'd say is that helps differentiate is the fact that we can provide shippers with multiple different outlets. If an LNG shipper, if the international markets change and the ships go somewhere else, we can, given the pipeline system that we have, can help redirect those flows if they have storage services and storage, but if they don't have storage service to other markets. Great, thanks for all of that.

Okay.

Perfect. Thanks, guys.

Thank you Sunil Sabal with Seaport Global Securities You May go ahead.

Yeah, Hi, good afternoon everybody.

And I apologize if I missed this but I just wanted to touch upon what kind of sequential trends you saw in Q3 with regard to yeah, Yeah, It's gonna drink volumes in various basins and also on the crude and condensate system.

Okay.

Sequential volumes.

Hang on just a second.

Yeah.

[laughter].

Okay.

Yes.

Sequential volume are on them.

Rich Kinder: Maybe as my follow-up to touch on the just the Capac's backlog build multiple. It's got a lot of focus over the previous few quarters. So, you know, it seemed to trend a little bit higher this quarter, you know, with an increase of the backlog as well. So just kind of wondering if you can talk about the moving pieces there, whether it's new projects driving it or whether the rising rate environment is having an impact on future returns. Any color would be helpful. Thanks.

On gas gathering they were down 1%.

And they were down 1%.

On on Chris.

So I was kind of flattish on a sequential basis.

And that's really the present data across the business.

Rich Kinder: Certainly. So one, let me start with the fact that we talked a little bit about this last quarter that, you know, the backlog multiple is not our focus. What we focus on is the return on projects. And so, you know, and we run a long term cash flow and assume a terminal value or not. And assume a renewal or a partial renewal or not. And for you guys, what we do in the backlog is we just look at first year EBITDA and translate that into a multiple to try to help you understand sort of what these projects are going to generate.

They're different basins and so that is a total for kinder Morgan selling gas that would be you know the primary basins would be Eagle Ford Bakken Haynesville.

And some of those were up a little bit and some were down a little bit I mean that I mean minus one I can say that's kind of flattish.

But down slightly and Ah on the credits primarily Bakken.

Got it thanks for that.

And at this time I am showing no further questions.

Okay. Michelle Thank you very much and everybody have a good day and a good evening. Thank you.

Rich Kinder: But the way, so all I'm saying is that the multiple may move up or down on the backlog. And these are still very attractive projects. So it's not like we only do projects that come into the backlog at three times. And again, it's kind of a mid-teens average unlevered IRR and we're adjusting up or down to that slightly based on cash flow. But this quarter, what we saw was the projects that went into service were about roughly three times multiple the projects that we place into the backlog so that the added projects were about a four times multiple.

And thank you. This concludes today's conference call. You May go ahead and disconnect at this time.

Rich Kinder: And then on one of the existing projects in the backlog, we decreased the year one EBITDA. And the reason we did that was because we think that project is going to take a little longer time to ramp into the EBITDA. And so we'll get, we think we'll get to the EBITDA that was in the backlog. It just won't happen till later in time. It won't be your one. Now, even if we never ramped on that project, that project is still a very attractive return. And I think we feel pretty good that we are going to add incremental volume there. Great. Makes sense.

Brian Reynolds: I'll leave it there. Enjoy the rest of your evening. Thanks.

Tristan Richardson: Our next caller is Tristan Richardson with Gosha Bank. Hey, Tristan. Hey, good morning. Give you a good evening. Just appreciate it, Kim. I guess just given the growth you guys are seeing in the core transport business. And certainly volumes are growing in midstream. But as you said, volumes are a little below plan and you guys are working on asset sales. I mean, do you see midstream continuing to contribute less to the business maybe as a percent over time, especially as we kind of look in the next year?

Tristan Richardson: And so when you say midstream, are you, are you, you're separating out the gathering and processing from, you know, all the taxes, interest, state, business, which is also in midstream? Correct. We focused on gathering and processing. Yeah. Do I think the gathering and processing is going to decrease as a percentage of the overall business? I don't know the answer as a percentage of the overall business. What I can tell you is I don't anticipate the gathering and processing the EBITDA from gathering and processing on the natural gas side is going down.

Tristan Richardson: Because, you know, we're, natural gas demand is growing. And we're going to continue to need more natural gas molecules. And our biggest position is in the Hainesville and in the Eagleford. And those are two places that are very close to the LNG demand. And as Rich and Seethel have both mentioned, you know, Eagleford has, gas has some very nice characteristics and that it has low nitrogen. And so I think that, you know, I think I would continue to expect to see growth in the volumes coming out of those days.

Tristan Richardson: Yeah, I mean, I think, you know, the relative comparison, you know, we secure some of these large projects, you might see a differential, an overall percentage, but I think Jim's right, when we look at our gathering and processing systems, you know, blocking, constrained, eager for approaching full processing capacity, and then the hangs though, we're trying to keep up. And so I think that trend will continue, as we see these energy facilities come on, and as far as the proportion, the relative proportion, it all depends on if we're successful in getting these big L&D fever projects in a lot, because you're obviously material.

Tristan Richardson: So on the, on the hazel being constrained, that means there's going to be opportunities for new projects as that, as that volume increase on the processing capacity at, being, being act capacity on processing and the evil for, you know, there may be, there may be opportunity. It is used to charge incremental rate there, so just to clarify what to say.

Tristan Richardson: Appreciate it, and then quick follow up just on the energy transition transition ventures side, maybe top of the funnel commercial activity you're seeing around RNG, just a sense of overall potential capacity projects out there, particularly as it get past 2024, and Autumn Hills comes online.

Tristan Richardson: Yes, I just met Anthony. Yeah, so as we look, you know, 2024 and beyond, we do have some additional projects within the North American natural acquisition, landfill, electric projects, which are potential RNG conversion opportunities. And now we've got a little clarity from the EPA on the EWINS potential. We are now looking at those potential projects again. And we have a few other ones, I would say, that we're looking at in terms of organic growth potential, but our focus has really been, you know, getting our existing projects up and in service and operating well.

Tristan Richardson: And going through the RNG generation process. But yes, we do have some potential opportunities beyond Autumn Hills. And just on the arm of facilities, I mean for an update there, you know, two of the three that we're bringing in service this year are in service. One, we've had a few operational issues. We think we largely work through the other one is ramping up and the third one we expect to be on by the end of the year.

Tristan Richardson: Appreciate the update.

Tristan Richardson: Thank you, Kim.

Tristan Richardson: Thank you.

Neal Dingmann: Our next caller is Neil, David with true securities. You may go ahead. I'm after dinner. We talked a bit about M&A. I guess my question is just perhaps on your term M&A. I'm just wondered how you all would think about potentially adding natural gas pipelines or other assets. I'm just wondering. Is there a preference for, you know, are you sort of agnostic on looking at various assets? I think that, you know, acquisitions are easy to imagine and hard to do.

Neal Dingmann: And so, you know, I think that it's more acquisitions are more opportunistic is what I would say for the most part. And yes, we are always interested in acquisitions and have been concerned for option. And we have a pretty disciplined process around looking at it.

Neal Dingmann: You know, there are three criteria that are core for us to do acquisition one. You know, the asset has to fit our strategy. So it needs to be fee-based, you know, energy infrastructure to, you know, it needs to have the right attractive economics around it. Which means it needs to be accretive to be CF for share and have an attractive, unlobbered after tax returns. And three, you know, it can't be, you know, we prefer that it not be dilutive to our long term debt metric up or in a half times debt to either. And generally, I don't think we would do something that is dilutive to that debt metric. It would have to be something that was very, very special.

Neal Dingmann: Good, that don't make sense.

Neal Dingmann: And then, came I think you mentioned earlier, you mentioned something about the rent price and I'm just wondering did you say you saw this increase or maybe also could you speak to the direction of your of the D3 rents? On the D3 rents, they have gone to $3 and 40 cents right now. I think so, you know, they were below $2 before June when the EPA came out with the new RBOs.

Neal Dingmann: You'll post that, they traded in and around $3 and in the last week or so, we've seen them go up to $3 and 40 cents. And, you know, hard to pinpoint exactly what that is. But, you know, I think there may be people out there that haven't satisfied their 22 obligations yet and that can be driving some of the 23 pricing. So, I think you know, rents prices right now look pretty good for 2024. Yeah, sounds encouraging. Thank you.

Keith Stanley: Our next caller is Keith Stanley with Wolf Research. Hi, good afternoon.

Keith Stanley: Sorry if I missed this, but any updated comments on the potential to expand Gulf Coast Express and where things are and discussions with customers and how soon that could move forward. Yeah, we continue to have discussions, discussions with customers and, you know, which is kind of where we were last quarter at this time. And I think there are people that are interested in that, but we don't have anything to announce yet.

Keith Stanley: Okay, second question. Just on the on the 2023 commentary of being slightly below plan, it just it seems to me like the company was pretty much on budget in the first half of 2023 on the EBITDA line. Anyway, and Q3 may maybe less than 50 million below budget. I mean, are we talking when we're saying slightly below plan that maybe even like less than 1% below the EBITDA target. It just it just seems kind of small with you guys calling it out.

Keith Stanley: Yes, hey Keith, it's David. Yeah, it's that's why we said slightly below. It's not a material amount below. It's disappointing that we are below because we're having really strong performance across a number of categories in our base business, the commodity price impact is less impactful now that we've seen some improvement, but as we go through the year, we put on additional hedges and so forth. So we have less upside as the later part of the year improvement in commodity prices materialized.

Keith Stanley: And we've continued to have some some weakness in other parts of the business that offset some of that commodity price improvement. So net net is unfortunately don't have additional detail for you, which regard to a slightly determination, but it's disappointing that we're still a little bit down, but it's not much.

Gabriel Moreen: Okay, thank you. Thank you, Gabe Marie, what's my through how you make our heads, sir?

Gabriel Moreen: Hey, good afternoon, everyone. Just a quick question on the fixed the floating and then back to fixed hedges that you've got on some of which are expiring soon, just wondering how you're thinking about that. I would some of the edges expiring in the near not too distant, but for interest expense for next year. So, you have about 25% of our death that flowed. For 2023, we locked in about half of that.

Gabriel Moreen: So we are floating rate for 2023, it was about 13%. Those edges that we put on in 23 expire at the end of 2023. And so you would expect us to go back to 25% but we do have swaps that roll off in 2023. And swaps that roll off in 2024. Those swaps total 2.75 billion. We have not made a decision yet as to whether we will put swaps on when those expire.

Gabriel Moreen: Or, just stay more fixed. If we just let all those swaps expire, did not put on any new swaps, we would be at 15% or 16% floating percentage. Our long-term strategy has been to float on a portion of our debt because the forward curve has generally overestimated future floating rates. And so we made, last year, we made $1.2 billion over the last 10 years on the swaps. This year, we gave back about 200 million.

Gabriel Moreen: So we made about a billion. You know, the one exception that we've seen in the charts to the forward curve over predicting floating rates. As then, when you've been in a rate hike cycle. And so I think we're going to be flexible as to when we put a new swaps back on. So I think there's a reasonable likelihood that we may be at a lower floating percentage than 25% in 2024 and may wait for a period of time to put some new swaps back on. But in the future, in the longer term, we may decide to put some of those swaps back on. But in no event do I think we would go above the 25%.

Gabriel Moreen: Thanks, Kim.

Gabriel Moreen: And then maybe if I can follow up with another question around the LNG opportunity and whether kindergarten sees the need to perhaps develop more of a marketing presence outside the interest rates to aggregate supply for some of these pipeline opportunities around LNG. And similarly, whether there's any thought to taking stakes in LNG export facilities yourself to sort of marry up that integrated approach. Yeah, so we actually do have a small gas marketing business right now, not really focused on LNG opportunities exclusively, but really just opportunities across the domestic market largely off of our assets.

Gabriel Moreen: You know, we'll see if there's incremental opportunities there, we may consider that as you suggest, but I mean, you know, we don't I don't see us going into an international market that really hasn't been our footprint and our strategy. But, you know, we'll be open to consider things as opportunities developing. We'll see where things go from there as far as our own LNG taking space out in an LNG facility. Again, you know, there's a lot of capital and a lot of risk related to doing that.

Gabriel Moreen: And so we have tended to be more fee for service and provide LNG both capacity transportation capacity. And as it pertains to Elv Island, you know, export facility for customers to play in the international markets. And I don't see that changing much at all.

Gabriel Moreen: Thank you.

Zack Van Everen: Our next caller is Zack Van Everen with DPH and company.

Zack Van Everen: Please go ahead, sir. Perfect. Thanks for taking my questions. Just want to go back up to the box and after seeing the announcements on the gas side. Have you guys looked into or considered converting the double H pipeline to an NGL pipe to help diversify some of the takeaway options up there? We have, yeah. We've read about this and this is Zack. We've looked at several different options for repurposing that being one of them and we continue to transport crude on the pipe.

Zack Van Everen: It's becoming more largely. We've got about 30 a day of residual contracts on that. You know, it's becoming as those contracts roll. It's becoming more of a basis pipeline, which obviously has an incremental elemental risk around it, but that's certainly something we would consider with the right deal. Gotcha. And then if you were to convert that, could we assume it's a similar capacity with NGLs and are there any opportunities to, you know, expand that at all if you were to go that route?

Zack Van Everen: It depends on what you put it in, but you know, ultimately, I think if we're still in liquid service, if you do NGLs, maybe a little bit more capacity with some pump ads, but still early. Yeah. It's just like any time we have an underutilized asset, we're looking for other opportunities to utilize that. I think this one's pretty early. Yeah. Okay.

Zack Van Everen: Perfect. Thanks, guys.

Sameel Sabal: Thank you.

Sameel Sabal: Sameel Sabal with Seaport Global Securities. You may go ahead. Yeah, hi. Good afternoon, everybody. Apologies I missed this.

Sameel Sabal: But I just wanted to touch upon what kind of sequential trends you saw in Q3 with regard to your gas-guide ring volumes in various basins and also on the Cougan condensate systems. Sequential volumes. Hang on a second. Sequential volumes on gas gathering, they were down 1% and they were down 1% on on cruise. So kind of flatish on sequential basis. And that's really representative across the basins. There's different basins and so that is total for tender Morgan selling gas.

Sameel Sabal: That would be, you know, the primary basins would be eagle birdbock and Haynesville. And some of those were up a little bit and some were down a little bit in the net. I mean minus one, I can say that's kind of flatish, but down slightly. And on the crew, it's primarily back in. Got it. Thanks for that. And at this time, I am showing no further questions.

Michelle: Okay Michelle, thank you very much and everybody have a good day and a good evening. Thank you. And thank you. This concludes today's conference conference.

Michelle: You may go ahead and disconnect at this time.