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Edited Transcript of KMI earnings conference call or presentation 17-Apr-19 8:30pm GMT

Q1 2019 Kinder Morgan Inc Earnings Call

TOPEKA Apr 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Kinder Morgan Inc earnings conference call or presentation Wednesday, April 17, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David Patrick Michels

Kinder Morgan, Inc. - VP & CFO

* Dax A. Sanders

Kinder Morgan, Inc. - Executive VP & Chief Strategy Officer

* James E. Holland

Kinder Morgan, Inc. - VP & President of Products Pipelines

* John W. Schlosser

Kinder Morgan, Inc. - VP & President of Terminals

* Kimberly Allen Dang

Kinder Morgan, Inc. - President & Director

* Richard D. Kinder

Kinder Morgan, Inc. - Executive Chairman of the Board

* Steven J. Kean

Kinder Morgan, Inc. - CEO & Director

* Thomas A. Martin

Kinder Morgan, Inc. - VP & President of Natural Gas Pipelines

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Conference Call Participants

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* Colton Westbrooke Bean

Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Midstream Research

* Dennis Paul Coleman

BofA Merrill Lynch, Research Division - Global Head of High Grade Debt Research and MD

* Gabriel Philip Moreen

Mizuho Securities USA LLC, Research Division - MD of Americas Research

* Jeremy Bryan Tonet

JP Morgan Chase & Co, Research Division - Senior Analyst

* Keith T. Stanley

Wolfe Research, LLC - Research Analyst

* Michael Jay Lapides

Goldman Sachs Group Inc., Research Division - VP

* Mirek Zak

Citigroup Inc, Research Division - Senior Associate

* Shneur Z. Gershuni

UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst

* Spiro Michael Dounis

Crédit Suisse AG, Research Division - Director

* Tristan James Richardson

SunTrust Robinson Humphrey, Inc., Research Division - VP

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Presentation

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Operator [1]

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Welcome to the quarterly earnings conference call. (Operator Instructions) This call is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Mr. Rich Kinder, Executive Chairman of Kinder Morgan. Thank you. You may begin.

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Richard D. Kinder, Kinder Morgan, Inc. - Executive Chairman of the Board [2]

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Thank you, Jennifer. Before we begin, as usual, I'd like to remind you that today's earnings releases by KMI and KML and this call includes forward-looking and financial outlook statements within the meaning of the Private Securities Litigation Reform Act of 1995, the Securities Exchange Act of 1934 and applicable Canadian provincial and territorial securities laws 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 and financial outlook statements and use of non-GAAP financial measures set forth at the end of KMI's and KML's earnings releases and to review our latest filings with the SEC and Canadian provincial and territorial securities commissions for a list of important material assumptions, expectations and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking and financial outlook statements.

As usual, before turning the call over to Steve, Kim and the rest of the team, I'd like to provide a quick update and some insight on our financial philosophy at Kinder Morgan. The important news today is that our Board has increased the dividend by 25% from $0.20 per quarter or $0.80 annualized to $0.25 per quarter or $1 annualized. Now this is consistent with our intention which we announced in mid-2017 to increase the dividend to $0.80 in 2018, to $1 in 2019 and to $1.25 in 2020. Central to our ability to do this is the strong and growing cash flow our assets are generating and you will see that again in the first quarter's results. We have used that cash to get our balance sheet in shape, having paid off over $8 billion of debt and received credit upgrades from both S&P and Moody's, and we intend to maintain our improved credit metrics. Beyond that, we are now focusing on using our cash to fund our expansion CapEx without need to access the equity market to pay our increasing dividends and repurchase stock when appropriate. In short, we believe we are being careful and conservative stewards of our cash flow and using it in ways that benefit all our shareholders. You should expect no less of us and should be reassured by the fact that the management and Board of KMI are significant shareholders. Steve?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [3]

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Yes. Thanks, Rich. We'll be updating you on both KMI and KML this afternoon. I'm going to start with a high level update and outlook on KMI, then turn it over to our President, Kim Dang, to give you the update on our segment performance; David Michels, KMI's CFO, will take you through the numbers; Dax Sanders will update you on KML. And then, we'll take your questions on both companies.

The summary on KMI is this: we're adhering to the principles that we've previously laid out for you. We have a strong balance sheet, having met our approximately 4.5x target of debt-to-EBITDA and with ratings upgrades from both Moody's and S&P. We're 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 the 25% dividend increase announced today and we continue to find an attractive growth opportunity with a net add of $400 million to our backlog during the quarter. Again, strong balance sheet, capital discipline, returning value to our shareholders and finding additional growth opportunities. Those are the principles we operate by.

Here are a few updates on some of the key projects. First, our Permian Natural Gas Pipeline project. Our customers are anxious to have us get their gas out of the Permian so that they can also get their oil and NGLs out. We have 2 projects to get the gas out, Gulf Coast Express and Permian Highway, each are about 2 Bcf a day of capacity, both are secured by long-term contracts and both are in execution stage. GCX is scheduled to be in service in October of this year, with Permian highway following a year later. Both projects are on schedule. Both projects have attractive returns which we expect to realize, and both projects bring us additional opportunities in our downstream pipeline. Combined, they bring 4 Bcf a day of incremental gas to a system that moves about 5 Bcf a day today.

Those projects will bring opportunities for downstream expansion and optimization as we find homes for that incremental gas through our connectivity with LNG facilities, Mexico exports, utility demand and Texas Gulf Coast industrial and pet-chem demand. Our execution and our economics on these projects both look good and we're actively managing our risks and opportunities on both.

These projects show us taking advantage of a very positive situation that is this: there is a large supply growth at Texas and a large demand growth in Texas, and we can bridge the 2 and connect to our premier Texas intrastate pipeline network and stay entirely within the State of Texas, which facilitates permitting and commercial flexibility.

As we pointed out at the conference in January of this year, 70% of the demand growth between now and 2030 is projected to be in Louisiana and Texas, largely due to LNG and our systems are well-positioned to benefit from that. Also it's worth noting that now 70% of our backlog is natural gas and 56% of that is in our midstream group, where market-based rates in terms of service prevail.

On another key project, Elba, our LNG facility we're building in Savannah, Georgia, we are closing in on the in-service date for the first unit. We now expect in-service of that unit to be around May 1, a couple of weeks from now. Getting the first unit on secures about 70% of the project revenue. The delay we've experienced is certainly unwelcome, but the risk allocation between us, our contractor and our customer provides significant production and mitigates the effect to our IRR. So we're introducing natural gas into the facility as well as refrigerants in that process it's been going well.

Also of note, we added a net $400 million to the backlog this quarter with new investments in natural gas and terminals primarily, more than offsetting projects placed in service. The backlog now stands at $6.1 billion.

A few observations about our expansion capital investments over time, as several people have asked how we're doing on the capital we deploy in those projects. So at the January conference, Kim took you through our historical project performance. If you look at Page 49 of what we provided there, you'll see a comparison between project EBITDA multiples and actual performance for the projects completed during the 2015 to 2018 period. You'll see that our actual performance was better than our original estimate, 5.8x versus 6.1x in the original estimate. You'll also see that the story is even better in natural gas, which makes up the bulk of our backlog, as I said, where we came out at 5.2x versus the original estimate of 5.8x.

On Page 50, you'll also see some other factors that partially offset the contribution from a project investment. But overall, project performance was very good. The point here is we're very careful with your capital. We don't swing at every pitch. We definitely have our hits and misses but we have shown that, in aggregate, we do well. We get there by having elevated return criteria well above our cost of capital. We focus on projects that we understand and primarily focus on expansion off of our existing footprint. All of this helps us invest in returns that are well above our cost of capital and helps overcome the inevitable curveball that come up during project execution. This has served us well, particularly during an increasingly challenging regulatory environment.

Next, an update on 501-G. As we said in our press release Monday of last week, we have reached settlements on 2 more systems, EPNG and TGP, which now resolve a vast majority of our 501-G exposure. This is an overhang that we now believe we have nearly entirely behind us. To settlements that are pending at the commission right now, here's our observations: the commission generally approves negotiated settlements, so they're pending before the commission but we expect that they will be approved; and two, they respect existing settlements including rate moratoria that are in place. The 501-G overhang has been a consistent part of the dialogue around our stock and we are pleased with our resolution of it. I believe we've said this before but when we announced the budget, we did not have anything in for settling 501-G matters, but we telegraphed that if we did get such settlements, it would likely be a good thing for the value of the company, and we're happy with the outcome.

Finally, before turning it over to Kim, a word about the KML process. As we say in the release, the process is ongoing. We don't have anything more than that to say at this point. And as you'll hear, when we get to KML, we've been attentive not only to the process but also to managing and developing existing business. It's comprised of a very good set of midstream assets, it gets a good deal of effort and focus from our management team. But what I want to say from a KMI investor standpoint is that you need to keep in mind that while the process gets a lot of attention, KML makes up about 2% of KMI EBITDA on a consolidated basis, so to just put it in perspective for KMI. And with that, I'll turn it over to Kim.

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Kimberly Allen Dang, Kinder Morgan, Inc. - President & Director [4]

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Okay. Thanks, Steve. So looking at the segment, natural gas had another outstanding quarter. It was up 12%. If you look at the market fundamentals, they remain very strong. For 2019, Lower 48 natural gas demand is expected to increase by 5.5 Bcf to approximately 95 Bcf a day, and the Lower 48 production is expected to increase by 7.5 Bcf a day.

Growth in the natural gas markets in the first quarter is driving very nice results on our assets. Transport volumes on our transmission pipes increased approximately 4.55 Bcf a day or 14%. This is the fifth quarter in a row in which volumes have exceeded the comparable prior period by 10% or more. If you look on the demand side, deliveries to LNG facilities off of our pipes were almost 1.5 Bcf a day in the quarter. That's an increase of approximately 900 million cubic feet a day versus the first quarter of 2018. Power demand on our system for the quarter was down slightly, primarily due to warmer weather. Exports to Mexico were up almost -- were up 183 million cubic feet to 3.2 Bcf a day, which is a 6% increase versus the first quarter of 2018.

On the supply side, production out of the key basins continues -- that we serve continues to increase. If you look at the Permian, natural gas wellhead volumes increased approximately 30%. The Bakken natural gas wellhead volumes increased about 31%. And the Haynesville, they increased 29%. And in Eagle Ford, they increased 8%. If you look at where these volumes showed up on our transmission pipes, EPNG volumes were up 1.1 Bcf a day, primarily due to Permian volume. WIC volumes were up 900 million cubic feet a day and CIG volumes were up approximately 550 million a day, both due to growth in the DJ basin. KMLA volumes were up 570 million cubic feet a day, primarily due to LNG exports.

On our gas-gathering assets, volumes were up 21% or 570 million cubic feet a day, driven by the production increases that I mentioned in the Haynesville, in the Eagle Ford and the Bakken. Overall, the higher utilization on our systems, a lot of which came without the need of significant capital, resulted in nice bottom line growth in the quarter, and longer term, as our systems fill up, will drive nice expansion opportunity.

If you look at the longer term, by 2024, the natural gas market is projected to grow to almost 110 Bcf a day, driven by increases in power generation, LNG and Mexico exports and continued industrial development, with most of that supply growth expected to come out of the Permian, the Haynesville and the Marcellus.

On our product side -- on the product segment, it was down slightly in the quarter. We had increased contribution from our Southeast refined products assets, Calnev and our Bakken crude assets that were more than offset by lower contributions from KMCC. Volumes on KMCC were actually up 16% in the quarter, but that was more than offset by lower rates. Overall, crude and condensate volumes were up 8%.

Refined product volumes in the quarter were flat. From the terminals business, it was up modestly in the quarter. The liquids business, which accounts for about 80% of the segment, was driven by strength in the Houston Ship Channel and on our Base Line Terminal expansion project in Edmonton. These increases were slightly -- were offset by the increased lease expense at our Edmonton South terminal, and that became a third-party obligation post the Trans Mountain sale. We added 1.4 million barrels of tankage versus the first quarter of 2018 due to the Base Line project coming online, bringing our total leasable capacity to almost 92 million barrels. The bulk business in our terminal segment was roughly flat.

Our CO2 segment was down in the quarter, and that's primarily due to lower crude and NGL prices but also to slightly lower production -- oil production volumes. Our net realized crude oil price was down about $11 per barrel and NGL prices were down about $4 per barrel.

Net crude oil production was down approximately 1,200 barrels a day or 3% due to lower production at Katz and Goldsmith. Katz and Goldsmith are 2 of our smaller fields and account for roughly 10% of our overall production. In these fields, since we're not implementing new development projects, we would expect a continued decline over time. On the other hand, at SACROC, which is our largest field and accounts for well over 60% of our production, we continue to find attractive projects. The CO2 sales and transport business was up slightly in the quarter due to about 5% higher CO2 volume. CO2 prices were essentially flat.

That's it for the segment overview. And I'll turn it over to David.

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David Patrick Michels, Kinder Morgan, Inc. - VP & CFO [5]

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Thanks, Kim. So today, we're declaring a dividend of $0.25 per share, up from $0.20 per share last quarter and in line with our budget to declare $1 per share for the full year 2019. As Rich mentioned, this would be a 25% increase over $0.80 per share compared to 2018.

KMI had a good quarter. We grew significantly from last year's first quarter and we overcame a number of items to end the quarter in line with our budget. We generated DCF per share of $0.60, which is 2.4x our declared dividend, or over $80 million -- $800 million in excess of that dividend. Additionally, as the press release points out, for the full year 2019, we forecast our DCF to be on budget, and that is even after incorporating the approximately $50 million impact from our announced FERC 501-G settlement. So very nice overall performance from our underlying business.

Turning to the earnings page. Revenues were in line with the first quarter of 2018, but operating income was higher due to lower quarter-over-quarter costs. Net income available to common stockholders for the quarter were $556 million, which is a 15% increase from the first quarter of last year. That includes the benefit of euro preferred dividend payments down from $39 million we paid last year in the quarter as a result of the conversion of our preferred equity securities in October of last year.

Adjusted earnings per share was up -- excuse me, was $0.25, up $0.03 or 14% from the prior period. Very nice growth there. Moving on to distributable cash flow. We believe distributable cash flow is a good reflection of our cash earnings and it was up -- it was $0.60 per share for the quarter, up $0.04 or 7% from Q1 of 2018.

Natural Gas segment was the largest driver of that growth, up $127 million or 12%. As has been the consistent theme for that segment, recently, we benefited on multiple fronts. TGP benefited from multiple expansion projects placed in service in 2018. EPNG was up, driven by Permian supply growth, more than offsetting the unfavorable impact from the FERC 501-G settlement in the quarter. Texas and Louisiana gathering and processing assets were up, driven by increased volumes from the Haynesville and Eagle Ford basins. Kinder Morgan Louisiana Pipeline was up due to the Sabine Pass Expansion. Our product segment was down $4 million, our terminal segment was up $2 million, our CO2 segment was down $48 million or 20%, and Kim covered the drivers behind those segments' performance for the quarter.

Kinder Morgan Canada was down $46 million from Q1 2018 as a result of the sale of our Trans Mountain asset. Our G&A expense was lower by $6 million due to greater amounts of costs to capitalize the growth projects as well as lower G&A resulting from the Trans Mountain sale. Those items were partially offset by higher pension expenses in the quarter. And those pension expenses are noncash and are backed out of our DCF metric and replaced with actual cash contribution.

Excluding the higher pension costs, G&A would have been $16 million lower than Q1 2018. Interest expense was $14 million lower, driven by lower debt balance and lower average rate on our bonds as well as greater interest capitalized to our growth projects. That was partially offset by higher LIBOR rates, which impacted the interest rate swaps we settled in the quarter. Our preferred stock dividends were down $39 million, as I mentioned before. So total DCF of $1.371 billion was up $124 million or 10% from the prior period. And to summarize the main changes, greater segment EBDA of $38 million, when you include the NCI change which relates to the segment, generated from greater natural gas contributions, offset by lower contributions from CO2 in Canada. $14 million lower interest expense, $16 million lower G&A expenses, excluding the noncash pension expense, and $39 million lower preferred stock dividend, which gets you to $107 million of the $124 million increase in the quarter.

DCF per share of $0.60 was again up $0.04 or 7% with the same drivers as total DCF but inclusive of the incremental shares issued as a result of the preferred stock conversion.

Moving onto the balance sheet. Once again, we have 2 net debt-to-EBITDA figures listed at the bottom of the table. At year-end 2018, KMI's balance, our adjusted net figure included all of the KML Trans Mountain sales proceeds, and the adjusted net debt figure excludes the portion of those proceeds that was paid to the KML public shareholders in early January.

Beyond year-end 2018, there's no difference between the net debt and adjusted net debt figures. We ended the quarter at 4.6x debt-to-EBITDA, which is consistent with our budget and slightly higher than year-end 4.5x. Our end of year 2019 leverage is currently forecasted to be 4.6x, which is slightly unfavorable to our plan of 4.5, but is consistent with our long-term leverage target of approximately 4.5x. The slightly higher-than-budget year-end leverage is due to slightly lower-than-planned EBITDA. The recent EBITDA is forecasted to be slightly below budget, while DCF is expected to be on budget is because of the add-backs of noncash pension expenses below EBITDA, and EBITDA does not pick up the benefit of our favorable interest expense.

Some items to note on the budget changes from year-end. A cash reduction of $3.1 billion due to $1.3 billion used to pay down KMI bonds maturing in the quarter, $800 million distribution to public KML shareholders, $340 million of Canadian taxes due to the Trans Mountain sale, and almost $300 million of lower revolver and CP borrowings.

In other assets, $700 million of the $712 million increase is due to booking a right to use asset resulting from a new lease accounting standard. The offsetting liabilities and short-term and long-term liabilities include $647 million, which are in long-term liabilities, which explains most of the increase of the $618 million in other liability.

In our short-term and long-term debt changes, in short-term, that was mainly due to the payoff of the $1.3 billion of bonds and $700 million of other bonds, which rolled into the short-term category and out of the long-term category.

Our adjusted net debt ended the quarter at $34.8 billion, which is an increase of $668 million from year end. And to reconcile that, we generated $1.371 billion in DCF, we spent approximately $750 million in growth capital and contributions to our joint ventures. We paid approximately $450 million of dividend. We paid $340 million of taxes on our Trans Mountain sale, and we had a working capital use of cash of approximately $500 million, the largest item in that are greater interest payments in the quarter, bonus payments, payroll and property tax payments.

With that, I'll turn it back to Steve.

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [6]

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Okay. Now we're going to turn to KML. And at KML, again, we realize the burning question here is the process we previously announced and which as we said today, remains ongoing and we should have an update for you in the coming weeks.

All we have to say at this point about the process is in the press release. But clearly, we'll have more to say once we have something to announce. In the meantime, as you'll hear from Dax, and as we've said all along, we've got a good business here that we continue to operate and invest in as a standalone business. And we're in a good position of not being forced to do anything. So we'll work through the process and we'll have, we believe, a conclusion in the coming weeks and let you know more about it at that time.

With that, I'll turn it over to Dax.

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Dax A. Sanders, Kinder Morgan, Inc. - Executive VP & Chief Strategy Officer [7]

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Thanks, Steve. Before I get into the results, I do want to update you on a couple of general business items. On the announced diesel export project, we received our required air permit amendment and key building permit and satisfied a key condition process in the customer's contract. As such, we can now commence construction activities and plan to do so in May. Consistent with previous statements, this is an approximately $43 million project that contemplates 2 new distillate tanks with combined storage capacity of 200,000 barrels underpinned by a 20-year take-or-pay contract that we expect to put in service during the first half of 2021.

On the [Chev 6] reactivation project that we've discussed, we expect to get our key building permits shortly, which will allow us to start construction in May also and have the project inserted in December 2019. As a reminder, the total CapEx on that project is approximately $8 million.

Now moving towards the results. And of note, as I talk to the results, I'm generally only going to reference results from continuing operations as discontinued ops only relates to prior period and is less relevant.

Today, the KML Board declared a dividend for the first quarter of 0.1625 per restricted voting share or $0.65 annualized, which is consistent with previous guidance. Earnings per restricted voting share for continuing operations for the first quarter of 2019 or $0.12, and that is derived from approximately $21 million of income from continuing operations which is up approximately $7 million versus the same quarter in 2018. Revenue increased across most all of KML's assets and was led by the contribution for the baseline tank and terminal assets coming online but was partially offset by the expiration of a third-party contract on ESRP, which we have previously discussed.

The increase in revenue was partially offset by higher G&A and depreciation. Total DCF from continuing operations for the quarter is 22.4 million, which is down about 1 million from the comparable period in 2018. That reflects coverage of approximately $1 million and reflects the DCF payout ratio of approximately 85%. The coverage and payout ratio this quarter are skewed by the large cash tax amount of almost $21 million, which is $14 million higher than the almost $7 million in the comparable period last year. As we previously discussed, we were not required to make cash tax payments in 2018 or 2018 operations, but rather were able to defer them to this year. As such, we made a cash tax payment in the first quarter of $17.3 million for 2018, which is consistent with what we budgeted, and a payment of $3.5 million for 2019, which together make up the almost $21 million. As we sit here today, while we have not finalized the 2018 Canadian return, we believe the tax ultimately owed will be less than the $17.3 million that we budgeted and paid, and that we'll be able to apply the excess in 2019.

Looking at the other components of the DCF variant. Segment EBDA before certain items is up $13 million compared to Q1 2018, with the terminal segment up $9 million and the pipeline segment up $4 million. The terminal segment was higher due primarily to Base Line coming online, which accounted for about 7.3 million. The North 40 added about 2.2 million, largely from rate increases in new TSAs, and Vancouver Wharves added about 1.7 million due to incremental volumes.

Those positives were offset by a 2.4 million negative variance on ESRP, primarily due to the expiration of the contract that I mentioned a second ago. The pipeline segment was higher primarily due to lower O&M on Cochin of approximately 2.7 million due to non-recurrence of inline inspection dig and other integrity management items performed in Q1 2018 and higher revenue of approximately $1.3 million, largely from FX and a short-term deal not in place in 2018.

G&A is negative about $1.5 million compared to Q1 2018, largely due to some transition, services cost related to the Trans Mountain sale and some higher labor. Interest is favorable by approximately $1.6 million due primarily to interest income on the $308 million of cash we held until making the cash tax payment of the same amount on the Trans Mountain gain on February 28.

I've already discussed cash taxes. Preferred dividends are flat and sustaining capital is slightly unfavorable compared to Q1 2018 due to timing.

And with that, I'll move on to the balance sheet comparing year-end 2018 to 3/31 this year. Cash decreased approximately $4.292 billion to approximately $47 million, which is due to $22 million of DCF, plus net borrowings of $50 million, offset by $3.977 billion in special distributions, $19 million in common dividends, $37 million paid on the final working capital adjustment on Trans Mountain paid to the government, $13 million of cash paid for expansion capital, $308 million of cash taxes paid on the Trans Mountain gain and a working capital other use of about $10 million. Other current assets increased approximately $14 million, primarily due to the prepaid asset associated with the federal income tax that I mentioned earlier and a small increase in accounts receivable.

Net PP&E decreased by 17.3 as a result of depreciation in excess of net assets placed in service. These assets increased from 0 to approximately $514 million as we adopted the new accounting rule, ASC 842, which requires us to record present value of operating leases. Deferred charges and other assets increased approximately $1.3 million, primarily as a result of a contribution to the Cochin reclamation trust. On the right-hand side of the balance sheet, the credit facility balance increased by $50 million from 0 as we borrowed a bit for general working capital needs. Distributions payable and distributions payable to related parties went to 0 as we made the January 3 special distributions of the Trans Mountain sale proceeds.

Current lease liabilities increased $17 million, which is the current portion of lease liability, that is the other side of the entry related to the ASC 842 lease accounting that I mentioned. Other current liabilities decreased by approximately $363 million, primarily due to the payment of the taxes payable on the gain that I mentioned of $308 million and the final Trans Mountain working capital payment of $37 million that I mentioned for the government. Lease liabilities increased by almost $497 million, which is the long-term portion of the lease liability, that is the other side of the entry related to the ASC 842 lease accounting I mentioned. Other long-term liabilities increased by about $1 million, primarily due to a small increase in the liability associated with the Cochin reclamation cost.

From a liquidity perspective, we ended the quarter with $47 million in cash and significant available liquidity as we had only $50 million drawn out of the $500 million revolver. Our debt-to-LTM adjusted EBITDA ratio was just under 1.4. However, given potential rating agency adjustments on operating leases and other items, this ratio is not necessarily indicative of our debt rating and capability in our rating. And with that, I'll turn it back to Steve.

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [8]

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All right. Thanks, Dax. (Operator Instructions)

And with that, Jennifer, you can open it up.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Shneur Gershuni from UBS.

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [2]

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Are you able to answer any questions about the KML process like the order, does that mean anything?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [3]

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The order?

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [4]

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The order in the press release of the 3 options, is it likelihood of success or preference?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [5]

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I hear you, Shneur. So no, beyond the press release, as would be customary when you're running a process like this, we're just going to run the process and really not comment beyond what we've said publicly in the release.

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [6]

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Okay. Fair enough. Just a couple of questions here. You're spending $3.1 billion in CapEx this year. You've added $600 million to the backlog. You recently walked from the DLCC port opportunity. Where do you see incremental opportunity to spend CapEx in the next 18 months based on -- in addition to where you're at right now? And do you have kind of a sense on a ZIP code of what 2020 would look like? Would it be higher or lower than where you expect '19 to shake out?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [7]

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On the last -- we're again continuing to guide to between $2 billion and $3 billion, and we won't get to that finally until we do our budget for 2019. But I think to your first question, as we mentioned in talking about what's going on in the Texas market and what's going on in Midstream generally as Kim took you through the numbers there, we continue to see good opportunities in natural gas, which makes up 70% of the backlog. We're seeing some opportunities here and there in refined products, continue to see small incremental opportunities there. As the year goes on, there's less coming in 2019, and we feel comfortable with kind of what we guided to in terms of discretionary CapEx at the beginning of the year as being where we'll end up with it. But that's where the opportunities are coming from. That's what we expect in 2019, and we're working on 2020 and beyond as we speak, but think the $2 billion to $3 billion is a reasonable guide.

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [8]

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Okay. And as a follow-up question, given there seems to be a trend towards refined product exports, is your operating leverage in your terminals in refined product system to be able to benefit around more export using ship channel? Or is what we're seeing right now kind of where you're at?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [9]

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Yes, there is. So we have 11 ship docks and 12 barge docks and we have been growing kind of at an 8% annual year-over-year rate.

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John W. Schlosser, Kinder Morgan, Inc. - VP & President of Terminals [10]

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8.5% in the last 5 years.

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [11]

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8.5% year-over-year over the last 5 years, as John points out. And you won't quite see that in the first quarter because we had some fog, we had some issues in the ship channel associated with the ITC incident which restricted that. But it's not for a lack of demand to move U.S. refined products to overseas markets.

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John W. Schlosser, Kinder Morgan, Inc. - VP & President of Terminals [12]

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Yes, and I don't think there's anybody better positioned than we are with the 11 docks there.

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [13]

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Right. We have some spare capacity which is part of your original question.

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Operator [14]

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The next question comes from Colton Bean from Tudor, Pickering, Holt & Co.

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Colton Westbrooke Bean, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Midstream Research [15]

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Just wanted to follow up on the comments on leverage. You've seen some positive actions from the ratings agencies, but it does seem like balance sheet has shifted higher in the priority list for the public markets. So could you just provide an update as to how you're looking at the 4.5x target and whether the strategy around capital allocation has shifted at all?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [16]

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Sure. We think the 4.5 is the right place to be for our particular assets given the size, the stability of cash flow, the diversity of the businesses that we have, the quality of customers, the dividend coverage, you put all those things together, we actually mapped higher than BBB flat. And so -- and we think that all of those factors with respect to our business is what has made the rating agencies comfortable with the upgrades that they've given us. So we think the 4.5x, given all of those considerations, is a fine place to be.

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Colton Westbrooke Bean, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Midstream Research [17]

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Okay. Good. And then on KMCC, I think you all have noted over the last few quarters that you have seen some rate reductions. Can you just update us as to where we stand in terms of recontracting process there?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [18]

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Yes, sure. The recontracting process is ongoing and we do expect to see some additional capacity commitments forthcoming but granted at lower rates. The other thing, the other key development for us on KMCC is, and we've kind of set this out as a goal and talked about it some over time, is we want to get that pipe to access Permian barrels. So right now, of course, you'd primarily see -- it primarily is a takeaway for growing the Eagle Ford production. But there's a lot of capacity away from the Eagle Ford, so even as it grows, it takes a while to fill that capacity back up and hence the rate reductions we're experiencing on the base business. But we participated in the Gray Oak expansion. That open season was just extended to April 30. However, we've got some pretty good commitments there and think we're going to be successful in getting Permian barrels attracted to KMCC. And so that'll be a part of our picture going forward as we mitigate and add back some growth to the asset. James?

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James E. Holland, Kinder Morgan, Inc. - VP & President of Products Pipelines [19]

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I think that's right.

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Colton Westbrooke Bean, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Midstream Research [20]

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Just a quick follow-up on that. So you mentioned the Permian barrels. Is there an ability to use that pipe as a logistical backstop for Corpus exports as well? If you had a weather issue in Corpus, could you use that to get barrels up to the Houston market?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [21]

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Yes. And so that's -- you put your finger right on it. So I think what we're seeing is that, and for good reason, is that I think customers are looking particularly in the early periods here. They're looking for an alternative and there's really no better alternative than the Houston market with the refining base that we have, with the access to the pet-chem markets and global markets over docks. All of the infrastructure that we and others have in the ship channel makes Houston an attractive market for these barrels. So it's I'd say more than a backstop, it's a nice market outlet alternative, a nice market option that we'd expect to be particularly strong in the early days, but will be around for a long time.

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Operator [22]

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The next question comes from Tristan Richardson from SunTrust.

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Tristan James Richardson, SunTrust Robinson Humphrey, Inc., Research Division - VP [23]

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Just briefly on the slightly lower EBITDA commentary. Should we think that deviation from budget is purely the incorporation of the 501-G settlements you guys talked about last week? Or are there some other puts and takes to think about?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [24]

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Sure. Go ahead, Kim.

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Kimberly Allen Dang, Kinder Morgan, Inc. - President & Director [25]

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There are some other puts and takes in that. It's obviously, guys, the delay on Elba, which is an impact versus the budget, and the pension expense that David talked about, which we add back that non-cash pension expense and track out the cash contributions for DCF. And that's why you see the differences in EBITDA and DCF and then also impact of slightly lower commodity prices, primarily the NGL price impact on CO2.

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [26]

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So the interesting thing -- I think the interesting conclusion is that notwithstanding those moving parts and now all of them affect DCF and EBITDA the same way. But we're basically flat on DCF and slightly down on EBITDA and we've absorbed and put behind us a significant regulatory risk that we did not budget for settlements on. And so really that tells you that net, the base business is strong and overcoming a lot in the way of headwind.

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Tristan James Richardson, SunTrust Robinson Humphrey, Inc., Research Division - VP [27]

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Great. Very helpful. And then just a follow-up. Could you talk about your potential JV project serving the Bakken and Rockies and just sort of the timing of the commercial process there in that evolution?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [28]

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Sure. So that's our project with Tallgrass. And we are in customer discussions right now. We think we have a good project because it is using, in significant part, existing pipeline asset. So our Double H system, which is not something to be contributed to the joint venture, but our -- one of our WIC Medicine Bow Laterals and the Cheyenne Plains system, which provide a significant takeaway capacity really for 3 sources of supply: one is the Bakken; second is some heavy barrels arriving from Canada at Guernsey; and third is Powder River and DJ Basin barrels. There's also the PXP system that is part of the joint venture that Tallgrass is contributing. So bottom line on all that is we're offering a lot of way to provide crude takeaway capacity with a lot of existing pipes. Only about 200 miles of new build to get to Cushing with the converted gas pipes. So significant capacity, probably more than we would expect to contractually fill up, but we're in contractual discussions right now. I think we've got a good proposal to the market, but not in the backlog and not -- nothing more definitive to announce at this point.

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Tristan James Richardson, SunTrust Robinson Humphrey, Inc., Research Division - VP [29]

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Helpful. So it could potentially have a decision this year?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [30]

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That's possible.

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Operator [31]

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The next question comes from Gabriel Moreen.

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Gabriel Philip Moreen, Mizuho Securities USA LLC, Research Division - MD of Americas Research [32]

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First question for me is just whether the backlog around Bakken GMP has shifted at all upwards since the Analyst Day? Just curious whether that's -- you've added anything there?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [33]

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Yes. We have had some capital additions there. We continue to see good performance from our customer shippers there and particularly a compelling need for additional gas processing and takeaway capacity. And so we have added a couple of projects in, call it the tens of millions ballpark to what we already had in when we did the January conference.

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Gabriel Philip Moreen, Mizuho Securities USA LLC, Research Division - MD of Americas Research [34]

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Okay. And then I was going to ask on Tall Cotton now that Phase 2 is completed. Can you maybe give us your latest thoughts on proceeding with Phase 3 given the performance out of the reservoir?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [35]

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Sure. So Tall Cotton, as we've said in the release, we've seen year-over-year growth in the production there. But it's behind our plan, and so, frankly, we are deferring further investment decisions in there until we get a better sense for downhole conformance and other work that we'd like to do to get confident that we're going to get what we -- get confidence in what we're going to ultimately be able to recover from the reservoir. In previous quarters, we had talked about operational issues regarding compression and gas handling and things like that. We think we have those behind us at this point, but it's still a question of what do we need to do in terms of conformance and we're going to get ourselves satisfied on that before we make a further significant capital commitment to it.

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Gabriel Philip Moreen, Mizuho Securities USA LLC, Research Division - MD of Americas Research [36]

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And does oil price matter at all for that, Steve? Or is it just agnostic of oil price?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [37]

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No, oil price always matters, yes. It always matters.

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Operator [38]

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The next question comes from Spiro Dounis from Crédit Suisse.

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Spiro Michael Dounis, Crédit Suisse AG, Research Division - Director [39]

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Just wondering if you could provide some guidance or maybe some color just around Waha gas prices and maybe some of the volatility and negative basis we've seen there lately. Just wondering if you'd expect that basis to stay negative and maybe even get worse over time until GCX comes online? And is there anything you can do to actually speed GCX up at this point?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [40]

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As I said at the beginning, we're doing everything I can -- we can for our customers there, both with our existing infrastructure as well as prosecuting our projects just as quickly as we can, and we feel very good about our schedule on GCX. We think we're making extremely good progress there. I think to answer your question about basis, you have to take a lot of other things into account like what producer self-help is available, more docks and things like that. And so we don't have any special insights into forward basis and how much of that can be mitigated by producer activity. But there's no question that there is heavy demand to get out of Permian, and we're doing our best to fill that demand for our customers.

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Thomas A. Martin, Kinder Morgan, Inc. - VP & President of Natural Gas Pipelines [41]

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Yes. And I mean this is nothing that isn't already out in the rags. But I mean really 2 main drivers have caused the real severe negative basis that we've experienced over the last few weeks; outages, and then, well, really outages on an intrastate system and interstate system. And so as those come back on, things should relieve a bit. And then the other thing we're hearing now, I guess, price as well, some of the dry gas portion of the Permian were seeing some nominal shutdowns until you get more relief out of the basin. And so all that should improve somewhat, but it's not going to be a pretty market until we get GCX online. And then I think beyond that, I think if GCX filled up very quickly then we could be in similar situation at this time next year.

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Gabriel Philip Moreen, Mizuho Securities USA LLC, Research Division - MD of Americas Research [42]

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Fair enough. I appreciate that color. And then I want to respect your process on Canada, so I won't ask specifically around that review. But I guess we have new data points coming out of Alberta in terms of the government turning over there. That would seem to sort of favor energy in Canada. Just curious how much of that sort of factoring into your decision-making process in general and maybe how you view the landscape there.

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [43]

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Look, I think we're -- generally, we feel good about having the terminal position that we have in Alberta with the connectivity that it has, with the customer base we have, with what we've been able to see on contract renewals and the performance that we've had on our expansion projects up there, we're not really opining around governments and all of that. We just work with our customers to get the new business as best we can. Of course, other people have written about what they believe the implications are for the energy business and we just kind of refer to those.

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Operator [44]

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The next question is from Keith Stanley from Wolfe Research.

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Keith T. Stanley, Wolfe Research, LLC - Research Analyst [45]

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On KML, just the -- the one thing in the statement is that I think before you guys had cited a transaction with KMI as one of the alternatives and that's not in the release this afternoon. Any color on why KMI, KML transaction is not one of the options?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [46]

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I'm going to stick to my script, Keith, and just say what we say in the press release is kind of all we have to say about it at this point.

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Keith T. Stanley, Wolfe Research, LLC - Research Analyst [47]

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Okay. On the Permian gas side, you guys have obviously led and been the only one successful in building, I guess, takeaway pipelines in the Permian. Is there any potential for Kinder to build a third Permian pipeline even potentially just given the downstream sort of benefits on connectivity that you guys have?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [48]

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Yes. And there are some discussions ongoing. There's nothing to announce, and of course, it's not in the backlog because we're not under contract or anything. But the demand to get out of the Permian continues to grow and the desire to be able to unlock the value that's in oil and the NGLs as well as the natural gas continues to put pressure on the need for additional takeaway capacity. And so short answer is yes. And if you look at the projections, they would show you that a GCX, a year, almost, is what's required in order to satisfy the need for takeaway capacity and to unlock the value in the other commodities out of the Permian. I don't know that it's going to be anything like that pace or that it's going to be at that pace, but there's certainly interest already in pipe 3.

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Operator [49]

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The next question comes from Dennis Coleman from Bank of America Merrill Lynch.

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Dennis Paul Coleman, BofA Merrill Lynch, Research Division - Global Head of High Grade Debt Research and MD [50]

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If I can start maybe a little bit more on GCX. You talk about doing everything you can for your customers. I guess I interpret that as trying to get it online as soon as possible. Some anecdotes out there from different sources that it is well ahead of schedule. I guess maybe the simple question is how much ahead of schedule might you be able to come on? Is it -- could it be -- are we talking weeks? Is it months?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [51]

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This is a long pipeline with a lot of compressor stations to commission, meter stations to commission, booster compression to commission and final testing and backfill. All the things you have to do to get a pipeline, a long linear asset where every inch is critical path, all that work we have to do. So we're going to leave it at we're doing well. We're doing well on schedule. We're happy with where we are in the construction process and we're going to do everything we can to be there for our customers just as fast as we can. But because of -- because it's a long linear project with a lot of mechanical parts to it that we've got to get completed, we're not comfortable in projecting some kind of an early in-service date or anything other than the October 1 at this point.

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Dennis Paul Coleman, BofA Merrill Lynch, Research Division - Global Head of High Grade Debt Research and MD [52]

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Sure. And that's totally fair. I guess, maybe a different question is the revenue turns on when you get FERC approval to put in service? Or I guess no FERC approval is...

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [53]

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It's not a FERC pipeline. The contract is going to service what we're able to provide, the 2 Bcf of capacity that's associated with this pipeline.

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Dennis Paul Coleman, BofA Merrill Lynch, Research Division - Global Head of High Grade Debt Research and MD [54]

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Okay, okay. My follow-up sort of more of a blue sky question, I guess. But with the increase in gas production that you're talking about, storage does come to mind particularly as we push up the volume of LNG that we're exploiting. There hasn't been much growth in storage in recent years. There is the old reason of summer, winter arbitrage doesn't exist. Is that something that you look at over time? Or how do you think about storage as an opportunity, maybe not in the next couple years but beyond that, as that volume grows?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [55]

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That's for you, Tom.

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Thomas A. Martin, Kinder Morgan, Inc. - VP & President of Natural Gas Pipelines [56]

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Yes. No, I mean, it's -- clearly, as the market grows volumetrically the way we talked about today, there's going to be a need for more storage over time that we and others certainly need, commensurate value to expand storage capability beyond what we have today. And so we'll be watching that. I mean I guess the one comment I'll make is that although the seasonal values have not really increased, they've probably contracted a bit. If we look at historically, we've seen -- certainly seen an increase in the extrinsic value, volatility value, which if you look at the component of supply and demand, that makes a lot of sense. And so to the extent the solid intrinsic and extrinsic grows and can support future expansions. Obviously, customers have stuff -- I mean, it's stuff behind all that, we'll look at expanding our storage footprint. But we're in a great position with the existing capability we have across all of our markets today to provide storage service, and that's an upside potential for us as the market grows.

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Dennis Paul Coleman, BofA Merrill Lynch, Research Division - Global Head of High Grade Debt Research and MD [57]

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Great. And would you expect it to be more salt or more sort of single turn stuff?

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Thomas A. Martin, Kinder Morgan, Inc. - VP & President of Natural Gas Pipelines [58]

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Yes. I think clearly with the volatility being more the component and obviously backstopping renewables, I think multicycle, high delivery types of storage make the most sense.

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [59]

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Which Tom's team has a lot of in Texas and has -- is facing additional LNG demand coming on, which is very chunky as well as additional supply coming on, which in this case, is chunky with the Gulf Coast Express coming on. So having -- our Texas intrastate system has significant amount of self-owned storage capability is we think an advantage as we see them play out.

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Operator [60]

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The next question comes from Michael Lapides from Goldman Sachs.

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Michael Jay Lapides, Goldman Sachs Group Inc., Research Division - VP [61]

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Actually, I had 2 unrelated ones. One regards connectivity for crude pipeline capacity between Corpus and the Houston Ship Channel and the Houston market. Just curious, are there lots of people concerned about enough pipeline capacity between the 2 markets relative to the size of export and inbound pipes? Are there opportunities to expand the KMCC? Or are you looking at that market and seeing what could be congestion down the road as more inbound crude pipelines come online?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [62]

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Okay. So I think that it's not like there's a lot of pipe going from Corpus to Houston or other way around. However, there is pipe that can get to Corpus or can get to Houston. And if you look at Gray Oak, for example, Gray Oak is being built all the way over to -- while it's being built to Freeport too, but also to Corpus ultimately. And it interconnects with -- will interconnect with KMCC, which then creates the Houston option. So that creates the kind of connectivity that you're talking about. And as we said in response to an earlier question, we expect that option to Houston to get some pretty good utilization as the things come on. And then, yes, we do have expansion capability on KMCC as well.

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Thomas A. Martin, Kinder Morgan, Inc. - VP & President of Natural Gas Pipelines [63]

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Right (inaudible)

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Michael Jay Lapides, Goldman Sachs Group Inc., Research Division - VP [64]

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Got it. Okay. I was having -- my apologies, I was having a hard time. I think you had about 70,000, 75,000 barrels. We can talk offline on that. Then any change in status or thoughts about kind of the embedded call option that is Gulf LNG in terms of just next steps from here, if any?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [65]

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We're going to continue to work with all of our stakeholders to find the right next steps. We did, today, get an approval of our EIS from the commission on the version that we filed earlier. But really, there's nothing more to update or report at this point.

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Operator [66]

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The next question comes from Mirek Zak from Citigroup.

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Mirek Zak, Citigroup Inc, Research Division - Senior Associate [67]

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With last week's newly signed presidential executive orders, does this potentially create or renew any opportunities for you to move gas further into the Northeast, maybe something similar to the Northeast Direct or maybe not as large or has not enough changed perhaps on the market demand side for anything to move forward?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [68]

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It's good but not that good. I think there's a lot -- there are a lot of other -- it is good, okay? There does need to be some rationality in the way the delegated authority is handled by the states under the environmental regulations, their permitting authority, so that's a good thing just generally. But there are a lot of things to work through in the Northeast on getting new pipeline infrastructure in place. And we continue to work on those projects. NED is a very big project and that's not a very likely resurrection. What we think is that we will find smaller one-off kind of projects to do, working very closely with our utility customers. And we have one of those that's ongoing right now and we're working on another.

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Mirek Zak, Citigroup Inc, Research Division - Senior Associate [69]

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Okay. Great. And switching to the Permian here. On all your gas pipeline outlets out of the Permian, do you have any level of open or marketing capacity on any of those lines available to you that allows you to take some advantage of the low Waha pricing there? And if so, can you quantify the level at all?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [70]

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Yes. I mean everything that -- well, first of all, I mean we do have takeaway capacity that's existing capacity out of the Permian and so we do have the opportunity to take advantage of that, provide outlets for our customers. But every nook and cranny is in use.

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Kimberly Allen Dang, Kinder Morgan, Inc. - President & Director [71]

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By our customers.

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [72]

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By our customers.

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Operator [73]

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(Operator Instructions) And the next question comes from Jeremy Tonet from JP Morgan.

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Jeremy Bryan Tonet, JP Morgan Chase & Co, Research Division - Senior Analyst [74]

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Just wanted to touch base on the environment building pipeline to Texas, and your thoughts on House Bill 991 and if there's any chance of passage there? And just in general, is it getting a little bit more difficult or you take a little bit more time to build pipes in Texas? Any thoughts you could provide there?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [75]

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Sure. So yes, there is -- the Texas Legislature is in session right now and so a number of bills are being considered regarding eminent domain and modifying the existing eminent domain process. We had really -- let me put it this way. This is not a traditional landowner versus pipeline issue any longer. I mean this is about the value of the Permian that benefits the entire State of Texas and the profound public interest that's at stake there when it comes to royalties, taxes, royalties going to the state to fund schools, et cetera. And so I think it's fair to say that people in the Texas Legislature understand how important it is to unlock the value of this resource in the public interest, and that's what you have eminent domain for. And so our view is that what will emerge from that process ultimately will be a rational, properly balanced approach to eminent domain. In the meantime, we are actively working with our landowners in order to get consensual arrangements in place and we're using the existing process of eminent domain where that makes sense as well. But we don't currently see any kind of existential threat to our projects by any stretch.

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Jeremy Bryan Tonet, JP Morgan Chase & Co, Research Division - Senior Analyst [76]

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That's helpful. I'm supposing you might not give a lot of color here, but just trying to put your comments together as far as the impact of EBITDA guidance here. There's $50 million to $150 million of impact. Does that kind of bookend what we're looking at here? Is this a right ZIP code or am I off on that field?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [77]

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We're just going to stick with the slightly down and what that implies. It's not a material value.

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Jeremy Bryan Tonet, JP Morgan Chase & Co, Research Division - Senior Analyst [78]

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Got you. One last one, if I could. I am out 2020, just wondering if that's any impact that you guys are seeing with regards to your storage position, any benefits that you guys see out in the different storage areas outside of Houston?

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [79]

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Yes. John Schlosser from our Terminals group.

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John W. Schlosser, Kinder Morgan, Inc. - VP & President of Terminals [80]

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It's a very small amount of our business, less than 3% and it's under long-term agreement most of it here at our BOSTCO facility. But there are opportunities for a segmentation project at BOSTCO to handle both high sulfur and low sulfur, and that's one of the largest handlers of distillate in the United States. There's opportunities for blending there as well.

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Jeremy Bryan Tonet, JP Morgan Chase & Co, Research Division - Senior Analyst [81]

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Has this helped like the New York market or anything else like that?

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John W. Schlosser, Kinder Morgan, Inc. - VP & President of Terminals [82]

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It has not helped the New York market. Our opportunity is mostly in the Gulf Coast, but there are smaller opportunities up and down the East Coast.

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Operator [83]

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There are no further questions in the queue at this time.

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Steven J. Kean, Kinder Morgan, Inc. - CEO & Director [84]

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Okay. Thank you very much.

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Operator [85]

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That does conclude today's call. Thank you for participating. You may disconnect at this time.