kmi-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

F O R M 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission file number: 001-35081

KINDER MORGAN, INC.

(Exact name of registrant as specified in its charter)


Delaware			80-0682103
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1001 Louisiana Street, Suite 1000, Houston, Texas 77002

(Address of principal executive offices)(zip code)

Registrant’s telephone number, including area code: 713-369-9000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class P Common Stock	KMI	New York Stock Exchange
2.250% Senior Notes due 2027	KMI 27 A	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of October 20, 2022, the registrant had 2,247,742,071 shares of Class P common stock outstanding.

KINDER MORGAN, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


			Page Number
	Glossary		2
	Information Regarding Forward-Looking Statements		3
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Income - Three and Nine Months Ended September 30, 2022 and 2021		4
	Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2022 and 2021		5
	Consolidated Balance Sheets - as of September 30, 2022 and December 31, 2021		6
	Consolidated Statements of Cash Flows - Nine Months Ended Sep tember 30, 2022 and 2021		7
	Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2022 and 2021		9
	Notes to Consolidated Financial Statements		10
	Note 1 .	General	10
	Note 2.	Acquisitio ns and Divestitures	11
	Note 3 .	Losses on Impairments and Other Write-downs	13
	Note 4 .	Debt	14
	Note 5 .	Stockholders’ Equity	15
	Note 6 .	Risk Management	16
	Note 7 .	Revenue Recognition	21
	Note 8 .	Reportable Segments	24
	Note 9 .	Income Taxes	25
	Note 10 .	Litigation and Environmental	26
	Note 1 1 .	Recent Accounting Pronouncements	30
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	General and Basis of Presentation		32
	Results of Operations		32
	Overview		32
	Consolidated Earnings Results (GAAP)		35
	Non-GAAP Financial Measures		38
	Segment Earnings Results		41
	DD&A, General and Administrative and Corporate Charges, Interest, net and Noncontrolling Interests		49
	Income Taxes		51
	Liquidity and Capital Resources		51
	Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries		55
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		56
Item 4.	Controls and Procedures		56
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		56
Item 1A.	Risk Factors		56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		56
Item 3.	Defaults Upon Senior Securities		56
Item 4.	Mine Safety Disclosures		57
Item 5.	Other Information		57
Item 6.	Exhibits		58
	Signature		59

KINDER MORGAN, INC. AND SUBSIDIARIES

GLOSSARY

Company Abbreviations

EPNG

El Paso Natural Gas Company, L.L.C.

Ruby

Ruby Pipeline Holding Company, L.L.C.

KMBT

Kinder Morgan Bulk Terminals, Inc.

SFPP

SFPP, L.P.

KMI

Kinder Morgan, Inc. and its majority-owned and/or controlled subsidiaries

SNG

Southern Natural Gas Company, L.L.C.

TGP

Tennessee Gas Pipeline Company, L.L.C.

KMLT

Kinder Morgan Liquid Terminals, LLC

Unless the context otherwise requires, references to “we,” “us,” “our,” or “the Company” are intended to mean Kinder Morgan, Inc. and its majority-owned and/or controlled subsidiaries.

Common Industry and Other Terms

per day

FERC

Federal Energy Regulatory Commission

Bbl

barrels

GAAP

U.S. Generally Accepted Accounting Principles

BBtu

billion British Thermal Units

LLC

limited liability company

Bcf

billion cubic feet

LIBOR

London Interbank Offered Rate

CERCLA

Comprehensive Environmental Response, Compensation and Liability Act

MBbl

thousand barrels

MMBbl

million barrels

CO2

carbon dioxide or our CO2 business segment

MMtons

million tons

DCF

distributable cash flow

NGL

natural gas liquids

DD&A

depreciation, depletion and amortization

NYMEX

New York Mercantile Exchange

EBDA

earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments

OTC

over-the-counter

PHMSA

Pipeline and Hazardous Materials Safety Administration

EBITDA

earnings before interest, income taxes, depreciation, depletion and amortization expenses, and amortization of excess cost of equity investments

ROU

Right-of-Use

U.S.

United States of America

EPA

U.S. Environmental Protection Agency

WTI

West Texas Intermediate

FASB

Financial Accounting Standards Board

Information Regarding Forward-Looking Statements

This report includes forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. They use words such as “anticipate,” “believe,” “intend,” “plan,” “projection,” “forecast,” “strategy,” “outlook,” “continue,” “estimate,” “expect,” “may,” “will,” “shall,” or the negative of those terms or other variations of them or comparable terminology. In particular, expressed or implied statements concerning future actions, conditions or events, future operating results or the ability to generate sales, income or cash flow, service debt or pay dividends, are forward-looking statements. Forward-looking statements in this report include, among others, express or implied statements pertaining to: the long-term demand for our assets and services, our anticipated dividends and capital projects, including expected completion timing and benefits of those projects.

Important factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements in this report include: the timing and extent of changes in the supply of and demand for the products we transport and handle; commodity prices; and the other risks and uncertainties described in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part I, Item 3. “Quantitative and Qualitative Disclosures About Market Risk” in this report, as well as “Information Regarding Forward-Looking Statements” and Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (except to the extent such information is modified or superseded by information in subsequent reports).

You should keep these risk factors in mind when considering forward-looking statements. These risk factors could cause our actual results to differ materially from those contained in any forward-looking statement. Because of these risks and uncertainties, you should not place undue reliance on any forward-looking statement. We disclaim any obligation, other than as required by applicable law, to publicly update or revise any of our forward-looking statements to reflect future events or developments.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

KINDER MORGAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues
Services	$	2,028	$	1,928	$	6,089	$	5,734
Commodity sales	3,108		1,868		8,416		6,343
Other	41		28		116		108
Total Revenues	5,177		3,824		14,621		12,185

Operating Costs, Expenses and Other
Costs of sales	2,717		1,559		7,294		4,504
Operations and maintenance	712		614		1,960		1,710
Depreciation, depletion and amortization	551		526		1,632		1,595
General and administrative	162		174		470		490
Taxes, other than income taxes	113		106		340		324

(Gain) loss on divestitures and impairments, net	(9)		4		(30)		1,602
Other income, net	—		(3)		(6)		(6)
Total Operating Costs, Expenses and Other	4,246		2,980		11,660		10,219

Operating Income	931		844		2,961		1,966

Other Income (Expense)
Earnings from equity investments	195		169		564		392

Amortization of excess cost of equity investments	(19)		(21)		(57)		(56)
Interest, net	(399)		(368)		(1,087)		(1,122)
Other, net (Note 2)	21		21		63		264
Total Other Expense	(202)		(199)		(517)		(522)

Income Before Income Taxes	729		645		2,444		1,444

Income Tax Expense	(134)		(134)		(512)		(248)

Net Income	595		511		1,932		1,196






Net Income Attributable to Noncontrolling Interests	(19)		(16)		(54)		(49)

Net Income Attributable to Kinder Morgan, Inc.	$	576	$	495	$	1,878	$	1,147





Class P Common Stock
Basic and Diluted Earnings Per Share	$	0.25	$	0.22	$	0.83	$	0.50

Basic and Diluted Weighted Average Shares Outstanding	2,253		2,267		2,262		2,265

The accompanying notes are an integral part of these consolidated financial statements.

KINDER MORGAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	595	$	511	$	1,932	$	1,196
Other comprehensive income (loss), net of tax
Net unrealized gain (loss) from derivative instruments (net of taxes of $(40), $41, $109 and $135, respectively)	123		(131)		(366)		(444)
Reclassification into earnings of net derivative instruments loss to net income (net of taxes of $(29), $(28), $(118), and $(55), respectively)	104		92		396		181

Benefit plan adjustments (net of taxes of $(1), $(2), $(6) and $(7), respectively)	2		6		18		28
Total other comprehensive income (loss)	229		(33)		48		(235)

Comprehensive income	824		478		1,980		961
Comprehensive income attributable to noncontrolling interests	(19)		(16)		(54)		(49)
Comprehensive income attributable to KMI	$	805	$	462	$	1,926	$	912

The accompanying notes are an integral part of these consolidated financial statements.

KINDER MORGAN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts, unaudited)


	September 30, 2022		December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents	$	483	$	1,140
Restricted deposits	240		7
Accounts receivable	1,873		1,611
Fair value of derivative contracts	194		220
Inventories	715		562


Other current assets	314		289
Total current assets	3,819		3,829

Property, plant and equipment, net	35,534		35,653
Investments	7,465		7,578
Goodwill	19,965		19,914
Other intangibles, net	1,875		1,678
Deferred income taxes	—		115

Deferred charges and other assets	1,334		1,649
Total Assets	$	69,992	$	70,416

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of debt	$	2,634	$	2,646
Accounts payable	1,579		1,259

Accrued interest	327		504
Accrued taxes	297		270
Fair value of derivative contracts	501		178

Other current liabilities	810		964
Total current liabilities	6,148		5,821

Long-term liabilities and deferred credits
Long-term debt
Outstanding	29,000		29,772

Debt fair value adjustments	107		902
Total long-term debt	29,107		30,674
Deferred income taxes	442		—

Other long-term liabilities and deferred credits	2,160		2,000

Total long-term liabilities and deferred credits	31,709		32,674
Total Liabilities	37,857		38,495
Commitments and contingencies (Notes 4 and 10)
Stockholders’ Equity

Class P Common Stock, $0.01 par value, 4,000,000,000 shares authorized, 2,249,727,830 and 2,267,391,527 shares, respectively, issued and outstanding	23		23
Additional paid-in capital	41,689		41,806
Accumulated deficit	(10,593)		(10,595)
Accumulated other comprehensive loss	(363)		(411)
Total Kinder Morgan, Inc.’s stockholders’ equity	30,756		30,823
Noncontrolling interests	1,379		1,098
Total Stockholders’ Equity	32,135		31,921
Total Liabilities and Stockholders’ Equity	$	69,992	$	70,416

The accompanying notes are an integral part of these consolidated financial statements.


KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions, unaudited)

	Nine Months Ended September 30,
	2022		2021
Cash Flows From Operating Activities
Net income	$	1,932	$	1,196
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, depletion and amortization	1,632		1,595
Deferred income taxes	499		236
Amortization of excess cost of equity investments	57		56

Change in fair market value of derivative contracts	45		60
(Gain) loss on divestitures and impairments, net	(30)		1,602
Gain on sale of interest in equity investment (Note 2)	—		(206)
Earnings from equity investments	(564)		(392)
Distributions from equity investment earnings	548		535
Changes in components of working capital
Accounts receivable	(260)		(119)
Inventories	(165)		(89)
Other current assets	(60)		(90)
Accounts payable	347		362
Accrued interest, net of interest rate swaps	(160)		(177)
Accrued taxes	27		15
Other current liabilities	2		71
Rate reparations, refunds and other litigation reserve adjustments	(189)		(97)
Other, net	(98)		(118)
Net Cash Provided by Operating Activities	3,563		4,440
Cash Flows From Investing Activities

Acquisitions of assets and investments, net of cash acquired (Note 2)	(488)		(1,518)
Capital expenditures	(1,144)		(894)
Proceeds from sales of investments (Note 2)	4		417
Contributions to investments	(60)		(36)
Distributions from equity investments in excess of cumulative earnings	126		121

Other, net	17		(1)
Net Cash Used in Investing Activities	(1,545)		(1,911)
Cash Flows From Financing Activities
Issuances of debt	8,898		4,950
Payments of debt	(9,569)		(6,459)
Debt issue costs	(21)		(20)
Dividends	(1,876)		(1,828)

Repurchases of shares	(333)		—

Proceeds from sale of noncontrolling interests (Note 2)	557		—
Contributions from noncontrolling interests	1		4
Distributions to investment partner	—		(67)

Distributions to noncontrolling interests	(85)		(14)
Other, net	(14)		(25)
Net Cash Used in Financing Activities	(2,442)		(3,459)

Net Decrease in Cash, Cash Equivalents and Restricted Deposits	(424)		(930)
Cash, Cash Equivalents, and Restricted Deposits, beginning of period	1,147		1,209
Cash, Cash Equivalents, and Restricted Deposits, end of period	$	723	$	279




Cash and Cash Equivalents, beginning of period	$	1,140	$	1,184
Restricted Deposits, beginning of period	7		25
Cash, Cash Equivalents, and Restricted Deposits, beginning of period	1,147		1,209


KINDER MORGAN, INC. AND SUBSIDIARIES (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions, unaudited)

	Nine Months Ended September 30,
	2022		2021
Cash and Cash Equivalents, end of period	483		102
Restricted Deposits, end of period	240		177
Cash, Cash Equivalents, and Restricted Deposits, end of period	723		279
Net Decrease in Cash, Cash Equivalents and Restricted Deposits	$	(424)	$	(930)

Non-cash Investing and Financing Activities
ROU assets and operating lease obligations recognized including adjustments	$	19	$	35

Increase in property, plant and equipment from both accruals and contractor retainage	23		4
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest (net of capitalized interest)	1,278		1,313
Cash paid during the period for income taxes, net	12		8

The accompanying notes are an integral part of these consolidated financial statements.

KINDER MORGAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, unaudited)


	Common stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Stockholders’ equity attributable to KMI		Non-controlling interests		Total
	Issued shares	Par value
Balance at June 30, 2022	2,257	$	23	$	41,654	$	(10,540)	$	(592)	$	30,545	$	1,080	$	31,625



Repurchases of shares	(9)			(160)						(160)				(160)
Restricted shares	2			5						5				5
Net income						576				576		19		595
Distributions										—		(32)		(32)
Contributions										—		1		1
Impact of change in ownership interest in subsidiary				190						190		311		501
Dividends						(629)				(629)				(629)

Other comprehensive income								229		229				229
Balance at September 30, 2022	2,250	$	23	$	41,689	$	(10,593)	$	(363)	$	30,756	$	1,379	$	32,135


	Common stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Stockholders’ equity attributable to KMI		Non-controlling interests		Total
	Issued shares	Par value
Balance at June 30, 2021	2,265	$	23	$	41,793	$	(10,496)	$	(609)	$	30,711	$	429	$	31,140





Restricted shares	2			(5)						(5)				(5)
Net income						495				495		16		511


Distributions										—		(6)		(6)
Contributions										—		1		1
Dividends						(616)				(616)				(616)



Other comprehensive loss								(33)		(33)				(33)
Balance at September 30, 2021	2,267	$	23	$	41,788	$	(10,617)	$	(642)	$	30,552	$	440	$	30,992


	Common stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Stockholders’ equity attributable to KMI		Non-controlling interests		Total
	Issued shares	Par value
Balance at December 31, 2021	2,267	$	23	$	41,806	$	(10,595)	$	(411)	$	30,823	$	1,098	$	31,921
Impact of adoption of ASU 2020-06 (Note 5)				(11)						(11)				(11)
Balance at January 1, 2022	2,267	23		41,795		(10,595)		(411)		30,812		1,098		31,910

Repurchases of shares	(19)			(333)						(333)				(333)
EP Trust I Preferred security conversions				1						1				1
Restricted shares	2			36						36				36
Net income						1,878