Welcome to the Quarterly Earnings Conference Call. [Operator Instructions] I would like to inform all parties that today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mr. Rich Kinder, Executive Chairman of Kinder Morgan. Thank you, sir. You may begin.

Thank you, Denise. Before we begin, as usual I'd like to remind you that KMI's earnings release today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934 as well as certain non-GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosures on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release as well as review our latest filings with the SEC for important material assumptions, expectations and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. Before turning the call over to Steve and the team, let me begin this call by touching upon the state of the energy segment of our economy as we start this new decade. As a share of the S&P 500, the energy business has declined from 16% at its high point in 2008 to about 4% today. There are many explanations for this deterioration in relative value, and some of them are frankly beyond the control of our industry, but let me concentrate on a few things I believe our business needs to do if we are to succeed and prosper in this challenging environment. We need to show our investors that we have a path forward to produce reasonable returns for our shareholders on a sustainable long-term basis. This means that as an industry, we have to produce positive cash flow from our operations and use it to benefit our shareholders. We also have to constantly explain why fossil fuels and particularly natural gas have a long runway of future utilization under even the most bullish scenarios for converting the world's…

Thanks, Rich. I’ll cover a few highlights and turn it over to our President, Kim Dang, to give you the update on our segment performance. And our CFO, David Michels, will take you through the financials, then we’ll take your questions. The summary on KMI is this, we’re adhering to the principles that we’ve talked about for the last several quarters now and have laid out for you. We have achieved a strong balance sheet, having met and now improved on our approximately 4.5 times debt-to-EBITDA target and with a solid BBB flat rating from all 3 ratings agencies. We are maintaining our capital discipline through our return criteria, a good track record of execution and by self-funding our investments. We are returning value to shareholders with a 25% year-over-year dividend increase and another 25% increase coming in dividends declared in 2020, and we do continue to find attractive growth opportunities. Again, strong balance sheet, capital discipline, returning value to shareholders and finding additional opportunities across our network at attractive returns. Those are the principles we've been operating by. And during the third - fourth quarter, with the closing of the sale of Cochin and KML to Pembina and the subsequent sale of the Pembina shares we received as part of the consideration for the transaction, our debt-to-EBITDA stands at 4.3 times. We haven't changed our long-term target of 4.5 times, meaning that in our 2020 plan, we have $1.2 billion of balance sheet capacity. A few points on the balance sheet flexibility. First, it’s good to have it. We worked hard to get it, having reduced debt by $9.4 billion over the last 4 years or so. And as we said in our guidance in December, having this flexibility is, we believe, valuable to our shareholders, the flexibility itself.…

Okay. Thanks, Steve. Well, I’m going to sound like a broken record because we’re now up to 8 quarters, 8, that’s 2 years in a row in which natural gas transport volumes on our transmission pipes have exceeded the comparable prior year by at least 10%. For the fourth quarter, transport volumes were up 14% compared to the fourth quarter of 2018. Specifically, EPNG was up almost 1.3 Bcf a day due to increased Permian-related activity and colder California weather. TGP was up over 1 Bcf a day due to expansion projects. CIG was up 780 million cubic feet a day due to increased DJ production and higher heating demand on the front range in Colorado. KMLP volumes were up 542 million cubic feet a day due to the Sabine Pass Expansion. GCX went into full service, and we are now routinely operating at full capacity of approximately 2 Bcf a day. And the Texas intrastates were up over 500 million cubic feet a day on continued growth in the Texas Gulf Coast market and the additional supply coming in from GCX. On our gathering assets and natural gas, volumes were up 8% or 265 million cubic feet a day from the fourth quarter 2018, and that was driven primarily by higher volumes in the Eagle Ford and the Bakken. Our Bakken gathered volumes were up 18%, and our Eagle Ford volumes were up 22%. Haynesville volumes were essentially flat versus the fourth quarter of 2018. NGL transport volumes were up 23% in the fourth quarter compared to the fourth quarter 2018, and that was due to higher Cochin volumes. Our product segment was also up nicely in the quarter as we received strong contributions from our Bakken fleet assets, the splitter and SFPP. Overall, refined products volumes were flat…

All right. Thanks, Kim. So today, we’re declaring a dividend of $0.25 per share, which is in line with our budget to declare $1 per share for the full year 2019. That’s a 25% increase over the $0.80 per share declared for 2018. KMI's earnings per share this quarter was $0.27 per share, up 29% from the fourth quarter of 2018. And our adjusted earnings per share and DCF per share both grew 4% and 5% respectively from last year's fourth quarter. We generated DCF per share of $0.59, which is 2.4 times or approximately $785 million in excess of the declared dividend. For the full year 2019, we generated DCF of $2.19 per share, which is $0.01 off of our plan of $2.20. We had projected on the third quarter call that EBITDA and DCF would end the year below plan. EBITDA was less than 3% below plan, and DCF was only slightly below plan. Since the third quarter, we closed the gap relative to plan due to good commercial and operational performance in the fourth quarter. In fact, DCF ended the year below budget by only $13 million, which is less than a half of 1%. The main drivers of our performance versus budget include our Elba Island liquefaction facility coming on later than budgeted, lower commodity prices and volumes impacting our CO2 segments, and our FERC 501-G settlement, partially offset by strong Permian supply growth benefiting EPNG more than we had budgeted. So those are the largest drivers of our EBITDA performance. DCF was impacted by the same items, but also benefited from favorable interest expenses during the year and the add-back of non-cash pension expenses. So that was performance versus plan for the year. Now onto the details for our fourth quarter versus fourth quarter of…

All right. So a couple of quick reminders before we start the questions. Number one is, as I'm sure many of you know, we will have our investor - Annual Investor Conference next week. And so David and Kim and I and others will be going through the details of 2020. So we'll kind of ask you to wait for that more detailed presentation in terms of the 2020 plans. [Operator Instructions] All right. Denise, with that, let's open it up for questions.

Thank you. [Operator Instructions] And our first question does come from Shneur Gershuni with UBS. Your line is open.

Hi. Good afternoon, everyone. I'll keep my questions light given the Analyst Day next week. Maybe to start off, Steve, you’ve been very careful to say no programmatic buybacks in the past and you’ve reiterated it today, and you just want to use it with respect to opportunistic buybacks. Is there a plan, to either share with us today or at the Analyst Day next week, if you plan to complete the authorization by a certain point in time? Just a little bit more color with respect to how you’re thinking about buyback over a longer term basis?

Not really. I mean the guidance that we're giving is very consistent with what it’s been all along, which is we evaluate these decisions based on return. We do look to purchase opportunistically and not programmatically. We’ve never published any kind of target price, et cetera. And so you put that together, and you say we’re not going to announce a specific timing for the conclusion of the program either. But we have used about $525 million of the $2 billion program. We have used it opportunistically, and we are pleased with the results of our share repurchases under the program to date.

Okay. Fair enough. And maybe as a follow-up, I was just wondering if you can expand a little bit on the changes in the backlog that you put out in your prepared remarks. Has Elba already been removed from it, with it coming online? And were there any changes to your CO2 outlook with respect to the backlog or everything is kind of...

Yeah. So Elba, what we’ve been doing on Elba is since we've put the first unit in service, and that's really - I mean that's really when the balance of the plant was complete and when the substantial 80% to our share of the revenues started, we started reflecting Elba at - pulling it off the backlog as the units were coming on. Correct, yes?

Yes.

Okay. And then we have also put in service in our natural gas group as I mentioned, a processing plant in the Bakken area, which - that went into service. And so then that came off the backlog. And that's really the biggest chunk in that movement.

The next question comes from Jeremy Tonet with JPMorgan. Your line is open.

Good afternoon. Just wanted to start off with a question with M&A, actually, and it seems like Kinder could be in a position to do different things right here. We saw earlier this week, Magellan announced terminal sales at a valuation that appears to be quite robust, given where a lot of things trade today. And just wondering how you guys think about kind of portfolio optimization within that context, given the private equity bid there. On the other side, it seems like growth is slowing in certain parts of midstream, and maybe there's the potential to kind of roll up other players out there. And I know Kinder has been successful at rolling things up in the past. Just wondering how you think about those two different angles, and if anything could make sense for you guys going forward?

Well as Rich said at the start, our approach to our business and to this industry is conservative. And so we spent a lot of time and did a lot of work to get our balance sheet in the shape that it’s in. And we’re really not interested in hurting our leverage metrics through M&A or through anything else for that matter. Look, we’ve always looked around at opportunities, and we would continue to do so. But they would need to meet pretty substantial return criteria, similar to what other uses of capital would be. And so that kind of narrows that opportunity unless something really valuable comes along. You mentioned the recent announcement on asset purchase and sale between midstream operators. We did close a very small acquisition of a pipeline in South Texas. That was a very nice fit into our Texas intrastate system. And we certainly - and we did that at attractive terms on an attractive return for that capital invested, and so we’ll keep our eyes open for things like that.

Got you. And just as far as the prices that you see out there, I mean is that something that you pursue, just given how it was so higher than where a lot of guys trade right now or on the sale side?

Well, you mentioned the private equity bid that's out there. And that's a phenomenon that certainly we’ve observed as well, which means there's competition for those things. And really, Jeremy, I think it comes back to we’re just going to be very judicious with our shareholders money here. And we’re going to do things that we can do that we are very, very confident are going to produce value for us.

The next question comes from Spiro Dounis from Credit Suisse. Your line is open.

Hey. Good afternoon, everyone. Maybe just start with the project backlog. Steve, I appreciate your comments around capital discipline. I think that should be pretty welcomed by the market. But I just want to look to the backlog, it’s about 1.5 years of growth here going forward. And so just curious how we should think about how and when you start to replenish that backlog, and when you'll be in a position to sanction more projects outside of Permian Pass?

Yes. Sure. And actually it's something I should have said in response to Shneur's comment is as I said in talking about the backlog, there was also to KM's share, about 55 million or so of KML backlog that came out as well. So that, in addition to the processing plant, was the other explanation for the change quarter-to-quarter. Look, we don’t approach capital investments with the idea of replenishing a backlog. And so the information or the guidance that we can give you is if you look at over a very long period of time, 10 years plus, and you look at what we've been able to find on our network, it's been between $2 billion and $3 billion. And we'll show you this, it's in Kim's presentation, the detail on this. It's been between 2 and 3, and the mean has been 2.5. Next year, we've got 2.4 in, in the budget that we announced in December. We'll keep looking for those opportunities and find them as they - what we've seen, what we've experienced is that the opportunity to do those investments at attractive returns are the opportunities that really are along our network as it stands right now. And we've got a very vast network, and I think we'll continue to find opportunities there, but they'll be up and down. They could be in the low 2s, or they could be like they were in this past year, around 3. But we don't aim to replenish the backlog. We follow kind of what we see coming down the pike, including things like Permian Pass. And that's what gives us some confidence that our kind of 2 to 3 historical is probably still in the ballpark for us over the next little while.

Got it. That's fair. I appreciate that. Second question, just around ESG. You guys have been leaders here in midstream, and it looks like you're getting credit for that. And so I guess, one point to me what some large investors have come out and said, in the last 2 weeks, aiming to really sharpen their focus on ESG and screening investments in that manner. So just curious how much ESG really drives your decision-making on an asset-by-asset basis? Would you ever consider selling something or buying something in order to fill in the ESG standard? And specifically, I’m thinking about is something like your coal terminals, right? If you felt like that could be harmful to your ESG brand, would that be something you would consider selling?

Yes. So part of the ESG is G, which is governance, which is taking care of your shareholders and doing the right things with their money. And so we have not looked at it from the perspective of investment. We’re very, very weighted to natural gas, and that's a good business for us, and it's a big part of the solution going forward as Rich mentioned. But I do want to acknowledge what you said, we have tried to be leaders in this. And we've done, I think, a very good job across our business units, our operations. This isn't just some corporate thing. This is something that is permeated through our operations. And we have earned the number two ranking in our sector for how we manage ESG risk. Now that job is not done. We have to keep going. But we do things, for example, like look at scenarios of continued methane emissions reductions and we've really overachieved the target there, if you will. There's not really such a thing as overachieving it. But I mean we had a target in the one future group, which is a 1% limit across the entire chain from production through distribution. And the transmission and storage sector's allocation of that 1% is 0.31%, and we're at 0.02%. And so we've really done a very good job there. And that's good operational blocking and tackling. And by the way, that's in our shareholders' best interest, too, because we get paid to move methane, not to lose it. So that’s been a multi-decade process. And that's an example of how we incorporate it into the way we do business and the way we think of things. But we're not going to go out and do a dilutive renewable acquisition, nor are we going to do an economic divestiture from our investors' standpoint. We're keeping an eye on the G as well as the E and S.

The next question comes from Tristan Richardson with SunTrust. Your line is open.

Good morning – good afternoon, guys. Just a project question on Permian Highway, just a clarification. Can you talk about the expected timing of permitting on the federal side that you mentioned would allow the eastern spread to kick off?

Make it a point of not speaking for federal regulators. So all I can say is based on how fully the record is developed, and based on certain statutory timelines that are built in to the authorizing legislation, we expect it to be soon. And that's why I used the word soon and not a more specific one.

Okay. And then as a follow-up, just has the commercial discussion around Permian Pass changed now that the market in the world has seen how short-lived that narrow spread was?

Certainly everybody's noticed that, I think. I would say that we first saw, as we reported when we came out in the third quarter, we saw - I would tie it to - after the producers came out with their second quarter guidance, which was after we did our second quarter, and they tightened up on their capital plans, et cetera, that there was definitely a cooling of what had been some fairly active commercial discussions that we thought might have even led us to an FID decision last year. And that clearly has been delayed. I don't think it's cooled any further than - since then. And I think people do recognize that gas - additional gas takeaway is going to be needed. And something that I thought was interesting that one of the fundamentals guys wrote about is in a Permian, 97% of the value in the well is in the oil and the liquids that are produced. And oil prices are still pretty good. And the Permian has been completely debottlenecked to the point where Midland is trading above WTI. So that suggest, if you can economically produce oil, you're going to need to find a way to put the gas away. And we already have a constrained or a high basis differential between Waha and ship. And so I think as people start to evaluate their capital plans and think about what's economic to do and not, that they’re going to ultimately need some additional takeaway capacity. We can't guarantee that we're going to get it, but we think we're well placed for it.

The next question comes from Keith Stanley your line is open - from Wolfe Research.

Hi, thanks. Just wanted to follow-up on the M&A topic. The last call, you guys had cited some inbound interest at attractive multiples on some assets. Just curious if you're still getting interest in specific assets and level of optimism you can execute on accretive sales this year?

Yes. So this kind of came up in Jeremy's question where he pointed to the high PE bid. And what I would say is that there is a differential between how private equity investors, the multiple of which private equity investors place on the cash flows through certain assets that we generate and what it appears the public markets place. And you can see that in evidence of what the multiple was on Cochin You can see you it on what the multiple was on Utopia. That's out there for sure. But like these other things, I think what you're hearing as a theme for us is we are going to be careful and conservative. We're going to want to make sure that those numbers really work for us. And so, Keith, we're not giving any guidance and really can't practically give you any guidance on something being monetized this year or at any particular time period.

Okay, thanks. That’s it from me.

The next question comes from Michael Lapides with Goldman Sachs. Your line is open.

Hey, guys congrats on a good quarter. Real quick question. Just curious, over the last 30 to 60 days, how your conversations with producer customers have been, given how weak natural gas prices especially over the last couple of weeks have been? And how you think about how that flows through both your gathering business, but even some of the long-haul pipes, that have significant producer counterparties instead of regulated utility counterparties? Thinking like Ruby, obviously, given the impairment, but even some of the smaller ones like Fayetteville Express or MEP?

Okay. So a lot in there, but I think there are two things. One is the conversation is fundamentally different with an oil producer who is also producing natural gas, like the people in the Permian for example, right? And so that's where a lot of that incremental growth in gas production that we expect, we've seen this. Others have seen it a shift in where the growth is going to come from away from kind of some of the dry gas plays and more toward the associated gas plays, like what you see in the Permian and the Bakken. On the other hand, I mean there's no doubt that with gas prices where they are. The dry gas producers are under some strain, and they're being very careful and thoughtful about how they are managing their business, and those folks are our customers, and we're in good contact with them. And it's not -- those are not discussions about growth. Well, some of them are, but they're more discussions about making sure that we continue to have adequate credit support and that we're being constructive where we can be, et cetera. But the dry gas plays are more challenged and the associated gas that's coming out of the Bakken. I mean I think the next solution in the Bakken really needs to be incremental residue gas takeaway capacity out of there, and we already talked about the Permian. So no more there. Now on the other assets that you mentioned, specifically, we talked a little bit about Ruby. That's a challenged asset, challenged for the reasons we -- well, it's coming from the Rockies. Rockies is overpiped in terms of an export capacity basis. That's been the case for a while now, and there are alternative sources from Canada, for example, to serve the market in the northwest. So that's just - that's a challenged asset and FEP is challenged as well. But MEP, it's been a little bit of ups and downs, but we're seeing nice positive spreads that we're able to transact at. That's a little bit more of a - there's a multi-zonal system. It gives us access to a lot more supply and delivery interconnects and takeaways. So that asset has improved - improved some from the prospects that we had. No doubt, contracts that roll off there and that rolled off last year rolled out into a much more challenged spread environment, but there's still positive economic value on that asset. And so those are - that's kind of the rundown on those three.

Got it. Just one quick follow-up, any update on the JV you had talked about with Tallgrass, kind of in the Rockies and that neck of the woods with multiple assets involved. It's been a little quiet on that front.

Yes. We really haven't been able to make anything work there in terms of - we did an open season to secure some contracting - to recontract some expiring capacity on HH, which will go through Pony Express on its way to Cushing. We weren't able to do any other conversion, upstream or other expansion related projects. But we do still have pipe in the ground in the west that we are looking at alternatives on and continue to look at alternatives there.

The next question comes from Ujjwal Pradhan with Bank of America. Your line is open.

Good evening. Thanks for taking my question. First one, I wanted to touch briefly on your LNG exports market outlook. I think some global forecasts out there seem to paint a picture of the U.S. led LNG supply growth overwhelming global demand growth over the next couple of years. How concerned are you about risks to your overall nat gas supply to LNG export facilities in the U.S.?

We’re very happy with the LNG customers that we have, and I think the facilities that are coming out of the ground are coming online. And the way our contract structures work is we're getting paid for the capacity whether it's used or not. But they are using it. And so we're not - we're not exposed to and the way we structured everything, even on Elba, our contractual structure on Elba, is our contractual structure is such that we are not exposed to the vagaries of global commodity prices in natural gas. So I think we - obviously, we're interested in seeing additional LNG infrastructure get built and we'd like to be the ones to serve it. We're - depending on the day, 40% to 50% of the throughput that goes through to LNG exports. And that's been a nice growth story for us, and we'd like to see that continue to grow, but we're not exposed to, again, not exposed to the global LNG price because of the way our contracts are structured.

Got it. And maybe a quick follow-up on the M&A discussion earlier. If you were to able to do sizable asset sales this year, what would be the priority for the use of those proceeds?

Again, we make those - we've gotten to a milestone, obviously, on the balance sheet as we pointed out. And the way we've looked at uses of cash is further debt reduction, share repurchases, dividends or projects. And we make those determinations based on what we expect the returns to be from them. And that mostly comes down to after you've secured your balance sheet, you've secured your dividend, and we're meeting as we - what we projected in 2017. Then you look at the trade-off between a share repurchase and a project, and you make adjustments for the different nature of those two assets or those two investments. And you do the best return opportunity - risk-adjusted return opportunity that you face. So the same order of operations we've talked about before.

And there are no other questions at this time.

Okay. Thank you very much for sharing part of your day with us. Have a good evening.

Thank you. That does conclude today's conference call. We appreciate your participation, and you may disconnect at this time.