[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 76-0669886 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Page Number | ||
Glossary | ||
Information Regarding Forward-Looking Statements | ||
PART I. FINANCIAL INFORMATION | ||
Item 1. | Financial Statements. (Unaudited) | |
Consolidated Statements of Income and Comprehensive Income – Three and Nine Months Ended September 30, 2014 and 2013 | ||
Consolidated Balance Sheets – September 30, 2014 and December 31, 2013 | ||
Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2014 and 2013 | ||
Consolidated Statements of Shareholders’ Equity – Nine Months Ended September 30, 2014 and 2013 | ||
Notes to Consolidated Financial Statements | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | |
Item 4. | Controls and Procedures. | |
PART II. OTHER INFORMATION | ||
Item 1. | Legal Proceedings. | |
Item 1A. | Risk Factors. | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | |
Item 3. | Defaults Upon Senior Securities. | |
Item 4. | Mine Safety Disclosures. | |
Item 5. | Other Information. | |
Item 6. | Exhibits. | |
Signature |
KINDER MORGAN MANAGEMENT, LLC AND SUBSIDIARY | ||||||
Company Abbreviations | ||||||
Copano | = | Copano Energy, L.L.C. | KMI | = | Kinder Morgan, Inc. and its majority-owned and controlled subsidiaries | |
EPNG | = | El Paso Natural Gas Company, L.L.C. | KMP | = | Kinder Morgan Energy Partners, L.P. and its majority-owned and controlled subsidiaries | |
EPB | = | El Paso Pipeline Partners, L.P. and its majority-owned and controlled subsidiaries | TGP | = | Tennessee Gas Pipeline Company, L.L.C. | |
KMGP | = | Kinder Morgan G.P., Inc. | ||||
Unless the context otherwise requires, references to “we,” “us,” “our” or “KMR” are intended to mean Kinder Morgan Management, LLC, and its consolidated subsidiary, Kinder Morgan Services LLC. | ||||||
Common Industry and Other Terms | ||||||
CO2 | = | carbon dioxide | LLC | = | limited liability company | |
FASB | = | Financial Accounting Standards Board | SEC | = | United States Securities and Exchange Commission | |
GAAP | = | United States Generally Accepted Accounting Principles | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Equity in earnings of Kinder Morgan Energy Partners, L.P. | $ | 138 | $ | 69 | $ | 274 | $ | 340 | |||||||
Income tax expense | 46 | 22 | 93 | 149 | |||||||||||
Net income | $ | 92 | $ | 47 | $ | 181 | $ | 191 | |||||||
Earnings per share | |||||||||||||||
Basic and diluted | $ | 0.69 | $ | 0.39 | $ | 1.39 | $ | 1.61 | |||||||
Number of shares used in computing earnings per share | |||||||||||||||
Basic and diluted | 133 | 121 | 129 | 118 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income | $ | 92 | $ | 47 | $ | 181 | $ | 191 | |||||||
Equity in other comprehensive income (loss) of Kinder Morgan Energy Partners L.P., net of tax (expense) benefit of $(3), $-, $5, and $6 million, respectively | 6 | — | (9 | ) | (11 | ) | |||||||||
Comprehensive income | $ | 98 | $ | 47 | $ | 172 | $ | 180 |
September 30, 2014 | December 31, 2013 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets | |||||||
Accounts receivable – affiliated party | $ | 14 | $ | 10 | |||
Other current assets | 1 | 1 | |||||
Total current assets | 15 | 11 | |||||
Investment in Kinder Morgan Energy Partners, L.P. | 4,475 | 4,081 | |||||
Total Assets | $ | 4,490 | $ | 4,092 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | 3 | $ | 3 | |||
Other current liabilities | 12 | 8 | |||||
Total current liabilities | 15 | 11 | |||||
Deferred income taxes | 155 | 73 | |||||
Total Liabilities | 170 | 84 | |||||
Commitments and contingencies (Note 7) | |||||||
Shareholders’ Equity | |||||||
Voting shares – unlimited authorized; 4 voting shares issued and outstanding | — | — | |||||
Listed shares – unlimited authorized; 133,966,224 and 125,323,730 listed shares issued and outstanding, respectively | 6,816 | 6,113 | |||||
Retained deficit | (2,490 | ) | (2,108 | ) | |||
Accumulated other comprehensive (loss) income | (6 | ) | 3 | ||||
Total Shareholders’ Equity | 4,320 | 4,008 | |||||
Total Liabilities and Shareholders’ Equity | $ | 4,490 | $ | 4,092 |
Nine Months Ended September 30, | |||||||
2014 | 2013 | ||||||
Cash Flows From Operating Activities | |||||||
Net income | $ | 181 | $ | 191 | |||
Adjustments to reconcile net income to net cash flows from operating activities | |||||||
Deferred income taxes | 93 | 149 | |||||
Equity in earnings of Kinder Morgan Energy Partners, L.P. | (274 | ) | (340 | ) | |||
Changes in components of working capital | |||||||
Accounts receivable – affiliated party | (4 | ) | (3 | ) | |||
Other current assets | — | (1 | ) | ||||
Other current liabilities | 4 | 4 | |||||
Net Cash Provided by Operating Activities | — | — | |||||
Cash Flows From Investing Activities | |||||||
Purchase of i-units of Kinder Morgan Energy Partners, L.P. | (134 | ) | (145 | ) | |||
Net Cash Used in Investing Activities | (134 | ) | (145 | ) | |||
Cash Flows From Financing Activities | |||||||
Proceeds from issuance of shares | 134 | 145 | |||||
Net Cash Provided by Financing Activities | 134 | 145 | |||||
Net Increase in Cash and Cash Equivalents | — | — | |||||
Cash and Cash Equivalents, beginning of period | — | — | |||||
Cash and Cash Equivalents, end of period | $ | — | $ | — |
Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | ||||||||||||
Shares | Amount | Shares | Amount | ||||||||||
Voting Shares | |||||||||||||
Beginning Balance | 4 | $ | — | 3 | $ | — | |||||||
Share distributions | — | — | 1 | — | |||||||||
Ending Balance | 4 | — | 4 | — | |||||||||
Listed Shares | |||||||||||||
Beginning Balance | 125,323,730 | 6,113 | 115,118,335 | 5,201 | |||||||||
Share distributions | 6,907,981 | 563 | 5,411,719 | 449 | |||||||||
Share issuances | 1,734,513 | 134 | 1,757,300 | 145 | |||||||||
Tax impact of KMI drop-down to KMP (Note 3) | — | — | — | 26 | |||||||||
Tax impact of KMP Acquisition of Copano (Note 3) | — | 6 | — | 63 | |||||||||
Ending Balance | 133,966,224 | 6,816 | 122,287,354 | 5,884 | |||||||||
Retained Deficit | |||||||||||||
Beginning Balance | (2,108 | ) | (1,755 | ) | |||||||||
Net income | 181 | 191 | |||||||||||
Share distributions | (563 | ) | (449 | ) | |||||||||
Ending Balance | (2,490 | ) | (2,013 | ) | |||||||||
Accumulated Other Comprehensive (Loss) Income (net of tax) | |||||||||||||
Beginning Balance | 3 | 18 | |||||||||||
Changes in accumulated other comprehensive loss | (9 | ) | (11 | ) | |||||||||
Ending Balance | (6 | ) | 7 | ||||||||||
Total Shareholders’ Equity | 133,966,228 | $ | 4,320 | 122,287,358 | $ | 3,878 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Equivalent distribution value per share declared for the period(a) | $ | 1.40 | $ | 1.35 | $ | 4.17 | $ | 3.97 | |||||||
Equivalent distribution value per share paid in the period(a) | $ | 1.39 | $ | 1.32 | $ | 4.13 | $ | 3.91 | |||||||
Total number of share distributions paid in the period | 2,283,909 | 1,880,172 | 6,907,981 | 5,411,720 |
(a) | This is the cash distribution for each KMP common unit declared for the period or paid in the period, as applicable, indicated and is used to calculate our distribution of shares as discussed above. Because of this calculation, the market value of the shares distributed on the date of distribution may be less or more than the cash distribution per common unit of KMP. |
• | the average of our shares’ closing market prices from October 15-28, 2014, the ten consecutive trading days preceding the date on which our shares began to trade ex-dividend under the rules of the New York Stock Exchange. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues | $ | 3,933 | $ | 3,381 | $ | 11,162 | $ | 9,059 | |||||||
Operating costs, expenses and other | 2,772 | 2,514 | 8,213 | 6,807 | |||||||||||
Operating income | $ | 1,161 | $ | 867 | $ | 2,949 | $ | 2,252 | |||||||
Net income(a) | $ | 976 | $ | 697 | $ | 2,399 | $ | 2,499 | |||||||
Net income attributable to KMP | 963 | 689 | 2,370 | 2,472 | |||||||||||
General Partner’s interest in pre-acquisition income from operations and severance expense of March 2013 drop-down asset group | 1 | (2 | ) | (5 | ) | 11 | |||||||||
Remaining General Partner’s interest in income from continuing operations | 476 | 436 | 1,393 | 1,260 | |||||||||||
Limited Partners’ interest in net income | 486 | 255 | 982 | 1,201 |
(a) | Three and nine month 2014 amounts include $198 million of earnings associated with the early termination of a long-term natural gas transportation contract with a customer. The nine month 2013 amounts include (i) a $558 million gain from the remeasurement of KMP’s previously held 50% equity interest in Eagle Ford Gathering LLC to fair value as a result of KMP’s acquisition of Copano in May 2013 and (ii) a $177 million increase in expense associated with adjustments to legal liabilities related to both transportation rate case and environmental matters. The three and nine month 2013 amounts include a $1 million decrease and a $140 million increase, respectively, in after-tax loss and gain amounts from the sale of KMP’s equity and debt investments in the Express pipeline system. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Income tax expense | $ | 46 | $ | 22 | $ | 93 | $ | 149 | |||||||
Effective tax rate | 33.3 | % | 31.9 | % | 33.9 | % | 43.8 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In millions) | |||||||||||||||
Segment earnings before depreciation, depletion, amortization expense and amortization of excess cost of equity investments(a) | |||||||||||||||
Natural Gas Pipelines(b) | $ | 863 | $ | 635 | $ | 2,221 | $ | 2,315 | |||||||
CO2 | 388 | 340 | 1,083 | 1,040 | |||||||||||
Products Pipelines(c) | 222 | 202 | 633 | 399 | |||||||||||
Terminals | 249 | 217 | 696 | 610 | |||||||||||
Kinder Morgan Canada(d) | 50 | 43 | 138 | 286 | |||||||||||
Total segment earnings before depreciation, depletion, amortization expense and amortization of excess cost of equity investments | 1,772 | 1,437 | 4,771 | 4,650 | |||||||||||
Depreciation, depletion and amortization | (427 | ) | (377 | ) | (1,234 | ) | (1,062 | ) | |||||||
Amortization of excess cost of equity investments | (3 | ) | (3 | ) | (11 | ) | (7 | ) | |||||||
General and administrative expense | (126 | ) | (136 | ) | (411 | ) | (433 | ) | |||||||
Interest expense, net of unallocable interest income | (238 | ) | (220 | ) | (708 | ) | (637 | ) | |||||||
Unallocable income tax expense | (2 | ) | (4 | ) | (8 | ) | (10 | ) | |||||||
Income from continuing operations | 976 | 697 | 2,399 | 2,501 | |||||||||||
Loss from discontinued operations | — | — | — | (2 | ) | ||||||||||
Net income | 976 | 697 | 2,399 | 2,499 | |||||||||||
Net income attributable to noncontrolling interests | (13 | ) | (8 | ) | (29 | ) | (27 | ) | |||||||
Net income attributable to KMP | $ | 963 | $ | 689 | $ | 2,370 | $ | 2,472 | |||||||
General Partner’s interest in pre-acquisition income from operations and severance expense of March 2013 drop-down asset group | $ | 1 | $ | (2 | ) | $ | (5 | ) | $ | 11 | |||||
Remaining General Partner’s interest in income from continuing operations | 476 | 436 | 1,393 | 1,260 | |||||||||||
Limited Partners’ interest in net income | 486 | 255 | 982 | 1,201 |
(a) | Includes revenues, earnings from equity investments, allocable interest income and other, net, less operating expenses, |
(b) | Three and nine month 2014 amounts include $198 million of earnings associated with the early termination of a long-term natural gas transportation contract with a customer. Nine month 2013 amount includes a $558 million non-cash gain from the remeasurement of KMP’s previously held 50% equity interest in Eagle Ford Gathering LLC to fair value as a result of KMP’s acquisition of Copano in May 2013. |
(c) | Nine month 2013 amount includes a $177 million increase in expense associated with adjustments to legal liabilities related to both transportation rate case and environmental matters. |
(d) | Three and nine month 2013 amounts include a $1 million decrease and a $141 million increase, respectively, after-tax loss and gain amounts from the sale of KMP’s equity and debt investments in the Express pipeline system. |
• | KMR may be liable for damages to KMI under the terms and conditions of the KMR merger agreement; |
• | negative reactions from the financial markets, including declines in the prices of KMR shares due to the fact that current prices may reflect a market assumption that the KMR merger will be completed; |
• | having to pay certain significant costs relating to the KMR merger, including, in certain circumstances, a termination fee of $311 million; and |
• | the attention of management of KMR will have been diverted to the KMR merger rather than its own operations and pursuit of other opportunities that could have been beneficial to KMR. |
2.1 | Agreement and Plan of Merger, dated as of August 9, 2014, among Kinder Morgan Management, LLC, Kinder Morgan, Inc. and R Merger Sub LLC (filed as exhibit 2.1 to Kinder Morgan Management, LLC’s Current Report on Form 8-K filed on August 12, 2014 and incorporated herein by reference). | ||
10.1 | Support Agreement, dated as of August 9, 2014, by and among Kinder Morgan Energy Partners, L.P., Kinder Morgan G.P., Inc., Kinder Morgan Management, LLC, El Paso Pipeline Partners, L.P., El Paso Pipeline GP Company, L.L.C., Richard D. Kinder and RDK Investments, Ltd (filed as exhibit 10.1 to Kinder Morgan Management, LLC’s Current Report on Form 8-K filed on August 12, 2014 and incorporated herein by reference). | ||
31.1 | Certification by Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification by Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2 | Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
99.1 | Kinder Morgan Energy Partners, L. P. Quarterly Report on Form 10-Q for the quarter ended September 30, 2014. | ||
101 | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) our Consolidated Statements of Income for the three and nine months ended September 30, 2014 and 2013; (ii) our Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2014 and 2013; (iii) our Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013; (iv) our Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013; (v) our Consolidated Statements of Shareholders’ Equity for the nine months ended September 30, 2014 and 2013; and (vi) the notes to our Consolidated Financial Statements. |
By: | KINDER MORGAN MANAGEMENT, LLC, | |||
Registrant |
Date: | October 27, 2014 | By: | /s/ Kimberly A. Dang | |||
Kimberly A. Dang Vice President and Chief Financial Officer (principal financial and accounting officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Kinder Morgan Management, LLC; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Richard D. Kinder |
Richard D. Kinder |
Chairman and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Kinder Morgan Management, LLC; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Kimberly A. Dang |
Kimberly A. Dang |
Vice President and Chief Financial Officer |
Date: | October 27, 2014 | /s/ Richard D. Kinder |
Richard D. Kinder | ||
Chairman and Chief Executive Officer |
Date: | October 27, 2014 | /s/ Kimberly A. Dang |
Kimberly A. Dang | ||
Vice President and Chief Financial Officer |
Delaware | 76-0380342 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES TABLE OF CONTENTS | ||
Page Number | ||
Glossary | ||
Information Regarding Forward-Looking Statements | ||
Item 1. | Financial Statements (Unaudited) | |
Consolidated Statements of Income - Three and Nine Months Ended September 30, 2014 and 2013 | ||
Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2014 and 2013 | ||
Consolidated Balance Sheets - September 30, 2014 and December 31, 2013 | ||
Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2014 and 2013 | ||
Consolidated Statements of Partners’ Capital - Nine Months Ended September 30, 2014 and 2013 | ||
Notes to Consolidated Financial Statements | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
General and Basis of Presentation | ||
Critical Accounting Policies and Estimates | ||
Results of Operations | ||
Financial Condition | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3. | Defaults Upon Senior Securities | |
Item 4. | Mine Safety Disclosures | |
Item 5. | Other Information | |
Item 6. | Exhibits | |
Signature |
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES GLOSSARY | ||||||
Company Abbreviations | ||||||
APT | = | American Petroleum Tankers | EPNG | = | El Paso Natural Gas Company, L.L.C. | |
Calnev | = | Calnev Pipe Line LLC | General Partner | = | Kinder Morgan G.P., Inc. | |
Copano | = | Copano Energy, L.L.C. | KMEP | = | Kinder Morgan Energy Partners, L.P. | |
Eagle Ford | = | Eagle Ford Gathering LLC | KMGP | = | Kinder Morgan G.P., Inc. | |
EP | = | El Paso Corporation and its majority-owned | KMI | = | Kinder Morgan, Inc. | |
and controlled subsidiaries | KMR | = | Kinder Morgan Management, LLC | |||
EPB | = | El Paso Pipeline Partners, L.P. and its | SFPP | = | SFPP, L.P. | |
majority-owned and controlled subsidiaries | TGP | = | Tennessee Gas Pipeline Company, L.L.C. | |||
Unless the context otherwise requires, references to “we,” “us,” “our,” “KMP” or the “Partnership” are intended to mean Kinder Morgan Energy Partners, L.P., our majority-owned and controlled subsidiaries, and our operating limited partnerships and their majority-owned and controlled subsidiaries. | ||||||
Common Industry and Other Terms | ||||||
Bcf/d | = | billion cubic feet per day | GAAP | = | United States Generally Accepted | |
BBtu/d | = | billion British Thermal Units per day | Accounting Principles | |||
CERCLA | = | Comprehensive Environmental Response, | LIBOR | = | London Interbank Offered Rate | |
Compensation and Liability Act | LLC | = | limited liability company | |||
CO2 | = | carbon dioxide | MBbl/d | = | thousands of barrels per day | |
CPUC | = | California Public Utilities Commission | MLP | = | master limited partnership | |
EBDA | = | earnings before depreciation, depletion and | NEB | = | National Energy Board | |
amortization | NGL | = | natural gas liquids | |||
DD&A | = | depreciation, depletion and amortization | NYSE | = | New York Stock Exchange | |
DCF | = | distributable cash flow | OTC | = | over-the-counter | |
EPA | = | United States Environmental Protection | PHMSA | = | Pipeline and Hazardous Materials Safety | |
Agency | Administration | |||||
FERC | = | Federal Energy Regulatory Commission | Sustaining | = | capital expenditures which do not increase | |
FASB | = | Financial Accounting Standards Board | capacity or throughput | |||
WTI | = | West Texas Intermediate | ||||
When we refer to cubic feet measurements; all measurements are at a pressure of 14.73 pounds per square inch. |
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Millions, Except Per Unit Amounts) (Unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues | |||||||||||||||
Natural gas sales | $ | 1,044 | $ | 955 | $ | 3,152 | $ | 2,632 | |||||||
Services | 1,705 | 1,328 | 4,594 | 3,811 | |||||||||||
Product sales and other | 1,184 | 1,098 | 3,416 | 2,616 | |||||||||||
Total Revenues | 3,933 | 3,381 | 11,162 | 9,059 | |||||||||||
Operating Costs, Expenses and Other | |||||||||||||||
Costs of sales | 1,640 | 1,531 | 4,880 | 3,736 | |||||||||||
Operations and maintenance | 500 | 458 | 1,442 | 1,439 | |||||||||||
Depreciation, depletion and amortization | 427 | 377 | 1,234 | 1,062 | |||||||||||
General and administrative | 126 | 136 | 411 | 433 | |||||||||||
Taxes, other than income taxes | 80 | 71 | 250 | 220 | |||||||||||
Other expense (income), net | (1 | ) | (59 | ) | (4 | ) | (83 | ) | |||||||
Total Operating Costs, Expenses and Other | 2,772 | 2,514 | 8,213 | 6,807 | |||||||||||
Operating Income | 1,161 | 867 | 2,949 | 2,252 | |||||||||||
Other Income (Expense) | |||||||||||||||
Earnings from equity investments | 66 | 68 | 203 | 225 | |||||||||||
Amortization of excess cost of equity investments | (3 | ) | (3 | ) | (11 | ) | (7 | ) | |||||||
Interest, net | (238 | ) | (219 | ) | (707 | ) | (632 | ) | |||||||
Gain on remeasurement of previously held equity interest in Eagle Ford to fair value (Note 2) | — | — | — | 558 | |||||||||||
(Loss) Gain on sale of investments in Express pipeline system (Note 2) | — | (1 | ) | — | 224 | ||||||||||
Other, net | 14 | 5 | 29 | 28 | |||||||||||
Total Other Income (Expense) | (161 | ) | (150 | ) | (486 | ) | 396 | ||||||||
Income from Continuing Operations Before Income Taxes | 1,000 | 717 | 2,463 | 2,648 | |||||||||||
Income Tax Expense | (24 | ) | (20 | ) | (64 | ) | (147 | ) | |||||||
Income from Continuing Operations | 976 | 697 | 2,399 | 2,501 | |||||||||||
Loss from Discontinued Operations | — | — | — | (2 | ) | ||||||||||
Net Income | 976 | 697 | 2,399 | 2,499 | |||||||||||
Net Income Attributable to Noncontrolling Interests | (13 | ) | (8 | ) | (29 | ) | (27 | ) | |||||||
Net Income Attributable to KMEP | $ | 963 | $ | 689 | $ | 2,370 | $ | 2,472 | |||||||
Calculation of Limited Partners’ Interest in Net Income Attributable to KMEP: | |||||||||||||||
Income from Continuing Operations attributable to KMEP | $ | 963 | $ | 689 | $ | 2,370 | $ | 2,474 | |||||||
Less: Pre-acquisition income from operations of March 2013 drop-down asset group allocated to General Partner (Note 1) | — | — | — | (19 | ) | ||||||||||
Add: Drop-down asset groups’ severance expense allocated to General Partner (Note 1) | (1 | ) | 2 | 5 | 8 | ||||||||||
Less: General Partner’s remaining interest | (476 | ) | (436 | ) | (1,393 | ) | (1,260 | ) | |||||||
Limited Partners’ Interest | 486 | 255 | 982 | 1,203 | |||||||||||
Add: Limited Partners’ Interest in Discontinued Operations | — | — | — | (2 | ) | ||||||||||
Limited Partners’ Interest in Net Income | $ | 486 | $ | 255 | $ | 982 | $ | 1,201 | |||||||
Limited Partners’ Net Income per Unit: | |||||||||||||||
Income from Continuing Operations | $ | 1.05 | $ | 0.59 | $ | 2.15 | $ | 2.95 | |||||||
Loss from Discontinued Operations | — | — | — | (0.01 | ) | ||||||||||
Net Income | $ | 1.05 | $ | 0.59 | $ | 2.15 | $ | 2.94 | |||||||
Weighted Average Number of Units Used in Computation of Limited Partners’ Net Income per Unit | 463 | 435 | 456 | 408 | |||||||||||
Per Unit Cash Distribution Declared for the Period | $ | 1.40 | $ | 1.35 | $ | 4.17 | $ | 3.97 | |||||||
The accompanying notes are an integral part of these consolidated financial statements. |
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Millions) (Unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net Income | $ | 976 | $ | 697 | $ | 2,399 | $ | 2,499 | |||||||
Other Comprehensive Income (Loss): | |||||||||||||||
Change in fair value of derivatives utilized for hedging purposes | 156 | (102 | ) | (13 | ) | (73 | ) | ||||||||
Reclassification of change in fair value of derivatives to net income | (1 | ) | 25 | 35 | 15 | ||||||||||
Foreign currency translation adjustments | (97 | ) | 42 | (105 | ) | (72 | ) | ||||||||
Adjustments to pension and other postretirement benefit plan liabilities | (1 | ) | 31 | (4 | ) | 32 | |||||||||
Total Other Comprehensive Income (Loss) | 57 | (4) | (87 | ) | (98 | ) | |||||||||
Comprehensive Income | 1,033 | 693 | 2,312 | 2,401 | |||||||||||
Comprehensive Income Attributable to Noncontrolling Interests | (13 | ) | (8 | ) | (28 | ) | (26 | ) | |||||||
Comprehensive Income Attributable to KMEP | $ | 1,020 | $ | 685 | $ | 2,284 | $ | 2,375 | |||||||
The accompanying notes are an integral part of these consolidated financial statements. |
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Millions) | |||||||
September 30, 2014 | December 31, 2013 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 268 | $ | 404 | |||
Accounts receivable, net | 1,489 | 1,511 | |||||
Inventories | 426 | 393 | |||||
Other current assets | 401 | 360 | |||||
Total current assets | 2,584 | 2,668 | |||||
Property, plant and equipment, net | 29,842 | 27,405 | |||||
Investments | 2,400 | 2,233 | |||||
Goodwill | 6,710 | 6,547 | |||||
Other intangibles, net | 2,316 | 2,414 | |||||
Deferred charges and other assets | 1,488 | 1,497 | |||||
Total Assets | $ | 45,340 | $ | 42,764 | |||
LIABILITIES AND PARTNERS’ CAPITAL | |||||||
Current liabilities | |||||||
Current portion of debt | $ | 959 | $ | 1,504 | |||
Accounts payable | 1,419 | 1,537 | |||||
Accrued interest | 209 | 371 | |||||
Accrued contingencies | 612 | 529 | |||||
Other current liabilities | 782 | 636 | |||||
Total current liabilities | 3,981 | 4,577 | |||||
Long-term liabilities and deferred credits | |||||||
Long-term debt | |||||||
Outstanding | 20,810 | 18,410 | |||||
Debt fair value adjustments | 1,212 | 1,214 | |||||
Total long-term debt | 22,022 | 19,624 | |||||
Deferred income taxes | 296 | 285 | |||||
Other long-term liabilities and deferred credits | 990 | 1,057 | |||||
Total long-term liabilities and deferred credits | 23,308 | 20,966 | |||||
Total Liabilities | 27,289 | 25,543 | |||||
Commitments and contingencies (Notes 3 and 9) | |||||||
Partners’ Capital | |||||||
Common units | 9,876 | 9,459 | |||||
Class B units | (4 | ) | 6 | ||||
i-units | 4,637 | 4,222 | |||||
General partner | 3,099 | 3,081 | |||||
Accumulated other comprehensive (loss) income | (53 | ) | 33 | ||||
Total KMEP Partners’ Capital | 17,555 | 16,801 | |||||
Noncontrolling interests | 496 | 420 | |||||
Total Partners’ Capital | 18,051 | 17,221 | |||||
Total Liabilities and Partners’ Capital | $ | 45,340 | $ | 42,764 | |||
The accompanying notes are an integral part of these consolidated financial statements. |
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions) (Unaudited) | |||||||
Nine Months Ended September 30, | |||||||
2014 | 2013 | ||||||
Cash Flows From Operating Activities | |||||||
Net Income | $ | 2,399 | $ | 2,499 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, depletion and amortization | 1,234 | 1,062 | |||||
Amortization of excess cost of equity investments | 11 | 7 | |||||
Gain on remeasurement of previously held equity interest in Eagle Ford to fair value (Note 2) | — | (558 | ) | ||||
Gain on sale of investments in Express pipeline system (Note 2) | — | (224 | ) | ||||
Earnings from equity investments | (203 | ) | (225 | ) | |||
Distributions from equity investment earnings | 190 | 217 | |||||
Proceeds from termination of interest rate swap agreements | — | 96 | |||||
Changes in components of working capital, net of the effects of acquisitions: | |||||||
Accounts receivable | (11 | ) | 55 | ||||
Inventories | (30 | ) | (57 | ) | |||
Other current assets | 22 | (25 | ) | ||||
Accounts payable | (31 | ) | (150 | ) | |||
Accrued interest | (161 | ) | (132 | ) | |||
Accrued contingencies and other current liabilities | 189 | 32 | |||||
Rate reparations, refunds and other litigation reserve adjustments, net | 37 | 174 | |||||
Other, net | (170 | ) | (75 | ) | |||
Net Cash Provided by Operating Activities | 3,476 | 2,696 | |||||
Cash Flows From Investing Activities | |||||||
Payment to KMI for March 2013 drop-down asset group (Note 1) | — | (994 | ) | ||||
Acquisitions of assets and investments, net of cash acquired | (1,100 | ) | (292 | ) | |||
Capital expenditures | (2,603 | ) | (2,160 | ) | |||
Proceeds from sale of investments in Express pipeline system | — | 402 | |||||
Contributions to investments | (319 | ) | (163 | ) | |||
Distributions from equity investments in excess of cumulative earnings | 53 | 48 | |||||
Natural gas storage and natural gas and liquids line-fill | 22 | — | |||||
Sale or casualty of property, plant and equipment, investments and other net assets, net of removal costs | 16 | 61 | |||||
Other, net | (7 | ) | 7 | ||||
Net Cash Used in Investing Activities | (3,938 | ) | (3,091 | ) | |||
Cash Flows From Financing Activities | |||||||
Issuance of debt | 9,269 | 7,915 | |||||
Payment of debt | (7,427 | ) | (6,574 | ) | |||
Debt issue costs | (20 | ) | (22 | ) | |||
Proceeds from issuance of common units | 1,044 | 1,080 | |||||
Proceeds from issuance of i-units | 134 | 145 | |||||
Contributions from noncontrolling interests | 94 | 128 | |||||
Contributions from General Partner | — | 38 | |||||
Pre-acquisition contributions from KMI to March 2013 drop-down asset group | — | 35 | |||||
Distributions to partners and noncontrolling interests | (2,757 | ) | (2,332 | ) | |||
Other, net | (2 | ) | (1 | ) | |||
Net Cash Provided by Financing Activities | 335 | 412 | |||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | (9 | ) | (12 | ) | |||
Net (decrease) increase in Cash and Cash Equivalents | (136 | ) | 5 | ||||
Cash and Cash Equivalents, beginning of period | 404 | 529 | |||||
Cash and Cash Equivalents, end of period | $ | 268 | $ | 534 | |||
Noncash Investing and Financing Activities | |||||||
Assets acquired or liabilities settled by the issuance of common units (Note 1) | $ | — | $ | 3,841 | |||
Assets acquired by the assumption or incurrence of liabilities | $ | 73 | $ | 1,487 | |||
Supplemental Disclosures of Cash Flow Information | |||||||
Cash paid during the period for interest (net of capitalized interest) | $ | 852 | $ | 764 | |||
Cash paid during the period for income taxes | $ | 18 | $ | 15 | |||
The accompanying notes are an integral part of these consolidated financial statements. |
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (In Millions, Except Units) (Unaudited) | |||||||||||||
Nine Months Ended September 30, | |||||||||||||
2014 | 2013 | ||||||||||||
Units | Amount | Units | Amount | ||||||||||
Common units: | |||||||||||||
Beginning Balance | 312,791,561 | $ | 9,459 | 252,756,425 | $ | 4,723 | |||||||
Net income | 690 | 841 | |||||||||||
Units issued as consideration in the acquisition of assets | — | — | 44,620,662 | 3,841 | |||||||||
Units issued for cash | 13,448,424 | 1,044 | 12,847,743 | 1,080 | |||||||||
Distributions | (1,321 | ) | (1,068 | ) | |||||||||
Other | 4 | (1 | ) | ||||||||||
Ending Balance | 326,239,985 | 9,876 | 310,224,830 | 9,416 | |||||||||
Class B units: | |||||||||||||
Beginning Balance | 5,313,400 | 6 | 5,313,400 | 14 | |||||||||
Net income | 12 | 16 | |||||||||||
Distributions | (22 | ) | (21 | ) | |||||||||
Ending Balance | 5,313,400 | (4 | ) | 5,313,400 | 9 | ||||||||
i-Units: | |||||||||||||
Beginning Balance | 125,323,734 | 4,222 | 115,118,338 | 3,564 | |||||||||
Net income | 280 | 345 | |||||||||||
Units issued for cash | 1,734,513 | 134 | 1,757,300 | 145 | |||||||||
Distributions | 6,907,981 | — | 5,411,720 | — | |||||||||
Other | 1 | — | |||||||||||
Ending Balance | 133,966,228 | 4,637 | 122,287,358 | 4,054 | |||||||||
General partner: | |||||||||||||
Beginning Balance | 3,081 | 4,026 | |||||||||||
Net income | 1,388 | 1,270 | |||||||||||
Distributions | (1,375 | ) | (1,213 | ) | |||||||||
Acquisitions (Note 1) | — | (1,057 | ) | ||||||||||
Reimbursed severance expense allocated from KMI | 5 | 7 | |||||||||||
Contributions | — | 38 | |||||||||||
Other | — | 2 | |||||||||||
Ending Balance | 3,099 | 3,073 | |||||||||||
Accumulated other comprehensive income (loss): | |||||||||||||
Beginning Balance | 33 | 168 | |||||||||||
Other comprehensive loss | (86 | ) | (97 | ) | |||||||||
Ending Balance | (53 | ) | 71 | ||||||||||
Total KMEP Partners’ Capital | 465,519,613 | 17,555 | 437,825,588 | 16,623 | |||||||||
Noncontrolling interests: | |||||||||||||
Beginning Balance | 420 | 267 | |||||||||||
Net income | 29 | 27 | |||||||||||
Contributions | 94 | 128 | |||||||||||
Distributions | (39 | ) | (30 | ) | |||||||||
Acquisitions (Note 1 and 2) | — | 7 | |||||||||||
Other comprehensive loss | (1 | ) | (1 | ) | |||||||||
Other | (7 | ) | — | ||||||||||
Ending Balance | 496 | 398 | |||||||||||
Total Partners’ Capital | 465,519,613 | $ | 18,051 | 437,825,588 | $ | 17,021 | |||||||
The accompanying notes are an integral part of these consolidated financial statements. |
▪ | the earnings of the March 2013 drop-down asset group for the periods beginning on the effective dates of common control (described above) and ending March 1, 2013 (we refer to these earnings as “pre-acquisition” earnings and we reported these earnings separately as “Pre-acquisition income from operations of March 2013 drop-down asset group allocated to General Partner” within the “Calculation of Limited Partners’ Interest in Net Income Attributable to KMEP” section of our accompanying consolidated statement of income for the nine months ended September 30, 2013); and |
▪ | incremental severance expense related to KMI’s acquisition of EP and allocated to us from KMI. This severance expense allocated to us was associated with both the March 2013 drop-down asset group and assets we acquired pursuant to an earlier drop-down from KMI effective August 1, 2012; however, we do not have any obligation, nor did we pay, any amounts related to this expense. Furthermore, we reported this expense separately as “Drop-down asset groups’ severance expense allocated to General Partner” within the “Calculation of Limited Partners’ Interest in Net Income Attributable to KMEP” section of our accompanying consolidated statements of income for each of the three and nine months ended September 30, 2014 and 2013. |
Purchase Price Allocation: | |||
Current assets | $ | 6 | |
Property, plant and equipment | 951 | ||
Goodwill | 67 | ||
Other assets | 3 | ||
Total assets acquired | 1,027 | ||
Current liabilities | (5 | ) | |
Unfavorable customer contracts | (61 | ) | |
Cash consideration | $ | 961 |
Purchase Price Allocation: | |||
Current assets (including cash acquired of $30) | $ | 218 | |
Property, plant and equipment | 2,788 | ||
Investments | 300 | ||
Goodwill | 1,248 | ||
Other intangibles | 1,375 | ||
Other assets | 13 | ||
Total assets | 5,942 | ||
Less: Fair value of previously held 50% interest in Eagle Ford | (704 | ) | |
Total assets acquired | 5,238 | ||
Current liabilities | (208 | ) | |
Other liabilities | (28 | ) | |
Long-term debt | (1,252 | ) | |
Noncontrolling interests | (17 | ) | |
Common unit consideration | $ | 3,733 |
Pro Forma | |||
Nine Months Ended September 30, 2013 | |||
(Unaudited) | |||
Revenues | $ | 9,837 | |
Income from Continuing Operations | 2,465 | ||
Loss from Discontinued Operations | (2 | ) | |
Net Income | 2,463 | ||
Net Income Attributable to Noncontrolling Interests | (27 | ) | |
Net Income Attributable to KMP | 2,436 | ||
Limited Partners’ Net Income per Unit: | |||
Income from Continuing Operations | $ | 2.70 | |
Loss from Discontinued Operations | (0.01 | ) | |
Net Income | $ | 2.69 |
September 30, 2014 | December 31, 2013 | ||||||
KMEP borrowings: | |||||||
Senior notes, 2.65% through 9.00%, due 2014 through 2044(a) | $ | 18,300 | $ | 15,600 | |||
Commercial paper borrowings(b) | 135 | 979 | |||||
Credit facility due May 1, 2018(c) | — | — | |||||
Subsidiary borrowings (as obligor): | |||||||
TGP - Senior Notes, 7.00% through 8.375%, due 2016 through 2037 | 1,790 | 1,790 | |||||
EPNG - Senior Notes, 5.95% through 8.625%, due 2017 through 2032 | 1,115 | 1,115 | |||||
Copano - Senior Notes, 7.125%, due April 1, 2021 | 332 | 332 | |||||
Other miscellaneous subsidiary debt | 97 | 98 | |||||
Total debt | 21,769 | 19,914 | |||||
Less: Current portion of debt(d) | (959 | ) | (1,504 | ) | |||
Total long-term debt(e) | $ | 20,810 | $ | 18,410 |
(a) | All of our fixed rate senior notes provide that we may redeem the notes at any time at a price equal to 100% of the principal amount of the notes plus accrued interest to the redemption date plus a make-whole premium. |
(b) | As of September 30, 2014 and December 31, 2013, the average interest rate on our outstanding commercial paper borrowings was 0.27% and 0.28%, respectively. The borrowings under our commercial paper program were used principally to finance the acquisitions and capital expansions, and in the near term, we expect that our short-term liquidity and financing needs will be met primarily through borrowings made under our commercial paper program. |
(c) | See “—Credit Facilities” below. |
(d) | Amounts include outstanding commercial paper borrowings, discussed above in footnote (b). |
(e) | As of September 30, 2014 and December 31, 2013, our “Debt fair value adjustments” increased our debt balances by $1,212 million and $1,214 million, respectively. In addition to all unamortized debt discount/premium amounts and purchase accounting on our debt balances, our debt fair value adjustments also include (i) amounts associated with the offsetting entry for hedged debt and (ii) any unamortized portion of proceeds received from the early termination of interest rate swap agreements. For further information about our debt fair value adjustments, see Note 5 “Risk Management—Debt Fair Value Adjustments.” |
• | on February 24, 2014, we issued, in a public offering, 7,935,000 of our common units at a price of $78.32 per unit, resulting in net proceeds of $603 million; |
• | during the nine months ended September 30, 2014, we issued 5,513,424 of our common units pursuant to our equity distribution agreements with UBS (including 198,110 common units to settle sales made on or before December 31, 2013), resulting in net proceeds of $441 million; and |
• | during the nine months ended September 30, 2014, we issued 1,734,513 i-units to KMR (including 76,100 i-units to settle sales made on or before December 31, 2013), resulting in net proceeds of $134 million. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Per unit cash distribution declared for the period | $ | 1.40 | $ | 1.35 | $ | 4.17 | $ | 3.97 | |||||||
Per unit cash distribution paid in the period | $ | 1.39 | $ | 1.32 | $ | 4.13 | $ | 3.91 | |||||||
Cash distributions paid in the period to all partners(a)(b) | $ | 944 | $ | 845 | $ | 2,757 | $ | 2,332 | |||||||
i-unit distributions made in the period to KMR(c) | 2,283,909 | 1,880,172 | 6,907,981 | 5,411,720 | |||||||||||
General Partner’s incentive distribution(d): | |||||||||||||||
Declared for the period(e) | $ | 471 | $ | 434 | $ | 1,383 | $ | 1,248 | |||||||
Paid in the period(b)(c)(f) | $ | 463 | $ | 416 | $ | 1,357 | $ | 1,198 |
(a) | Consisting of our common and Class B unitholders, our general partner and noncontrolling interests. |
(b) | The period-to-period increases in distributions paid primarily reflect the increases in amounts distributed per unit as well as the issuance of additional units. |
(c) | Under the terms of our partnership agreement, we agreed that we will not, except in liquidation, make a distribution on an i-unit other than in additional i-units or a security that has in all material respects the same rights and privileges as our i-units. The number of i-units we distribute to KMR is based upon the amount of cash we distribute to the owners of our common units. When cash is paid to the holders of our common units, we will issue additional i-units to KMR. The fraction of an i-unit paid per i-unit owned by KMR will have a value based on the cash payment on the common units. If additional units are distributed to the holders of our common units, we will issue an equivalent amount of i-units to KMR based on the number of i-units it owns. Based on the preceding, the i-units we distributed were based on the $1.39 and $1.32 per unit paid to our common unitholders during the third quarters of 2014 and 2013, respectively, and the $4.13 and $3.91 per unit paid to our common unitholders during the first nine months of 2014 and 2013, respectively. |
(d) | Incentive distribution does not include the general partner’s initial 2% distribution of available cash. |
(e) | Amounts are net of waived incentive distributions of $33 million and $25 million for the three months ended September 30, 2014 and 2013, respectively, and $99 million and $54 million for the nine months ended September 30, 2014 and 2013, respectively, related to certain acquisitions. In addition, our general partner agreed to waive a portion of our future incentive distributions amounts equal to $34 million for our fourth quarter in 2014, $139 million for 2015, $116 million for 2016, $105 million for 2017, and annual amounts thereafter decreasing by $5 million per year from the 2017 level related to certain acquisitions. |
(f) | Amounts are net of waived incentive distributions of $33 million and $25 million for the three months ended September 30, 2014 and 2013, respectively, and $91 million and $36 million for the nine months ended September 30, 2014 and 2013, respectively, related to certain acquisitions. |
• | $1.40, the cash amount distributed per common unit |
• | the average of KMR’s shares’ closing market prices from October 15-28, 2014, the ten consecutive trading days preceding the date on which the shares began to trade ex-dividend under the rules of the NYSE. |
Net open position long/(short) | |||
Derivatives designated as hedging contracts | |||
Crude oil fixed price | (22.3) | MMBbl | |
Natural gas fixed price | (25.3) | Bcf | |
Natural gas basis | (23.5) | Bcf | |
Derivatives not designated as hedging contracts | |||
Crude oil fixed price | (0.2) | MMBbl | |
Crude oil basis | (3.3) | MMBbl | |
Natural gas fixed price | (4.5) | Bcf | |
Natural gas basis | (4.1) | Bcf | |
NGL fixed price | (0.4) | MMBbl |
Fair Value of Derivative Contracts | |||||||||||||||||
Asset derivatives | Liability derivatives | ||||||||||||||||
September 30, 2014 | December 31, 2013 | September 30, 2014 | December 31, 2013 | ||||||||||||||
Balance sheet location | Fair value | Fair value | Fair value | Fair value | |||||||||||||
Derivatives designated as hedging contracts | |||||||||||||||||
Energy commodity derivative contracts | Other current assets/(Other current liabilities) | $ | 42 | $ | 18 | $ | (12 | ) | $ | (33 | ) | ||||||
Deferred charges and other assets/(Other long-term liabilities and deferred credits) | 18 | 58 | (22 | ) | (30 | ) | |||||||||||
Subtotal | 60 | 76 | (34 | ) | (63 | ) | |||||||||||
Interest rate swap agreements | Other current assets/(Other current liabilities) | 111 | 76 | (2 | ) | — | |||||||||||
Deferred charges and other assets/(Other long-term liabilities and deferred credits) | 163 | 141 | (68 | ) | (116 | ) | |||||||||||
Subtotal | 274 | 217 | (70 | ) | (116 | ) | |||||||||||
Total | 334 | 293 | (104 | ) | (179 | ) | |||||||||||
Derivatives not designated as hedging contracts | |||||||||||||||||
Energy commodity derivative contracts | Other current assets/(Other current liabilities) | 7 | 4 | (5 | ) | (5 | ) | ||||||||||
Total | 7 | 4 | (5 | ) | (5 | ) | |||||||||||
Total derivatives | $ | 341 | $ | 297 | $ | (109 | ) | $ | (184 | ) |
Derivatives in fair value hedging relationships | Location of gain/(loss) recognized in income on derivatives | Amount of gain/(loss) recognized in income on derivatives and related hedged item(a) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Interest rate swap agreements | Interest expense | $ | (21 | ) | $ | (23 | ) | $ | 103 | $ | (317 | ) | ||||||
Total | $ | (21 | ) | $ | (23 | ) | $ | 103 | $ | (317 | ) | |||||||
Fixed rate debt | Interest expense | $ | 21 | $ | 23 | $ | (103 | ) | $ | 317 | ||||||||
Total | $ | 21 | $ | 23 | $ | (103 | ) | $ | 317 |
(a) | Amounts reflect the change in the fair value of interest rate swap agreements and the change in the fair value of the associated fixed rate debt, which exactly offset each other as a result of no hedge ineffectiveness. |
Derivatives in cash flow hedging relationships | Amount of gain/(loss) recognized in other comprehensive income on derivative (effective portion)(a) | Location of gain/(loss) reclassified from Accumulated other comprehensive income into income (effective portion) | Amount of gain/(loss) reclassified from Accumulated other comprehensive income into income (effective portion)(b) | Location of gain/(loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing) | Amount of gain/(loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing) | |||||||||||||||||||||||
Three Months Ended September 30, | Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||
Energy commodity derivative contracts | $ | 156 | $ | (102 | ) | Revenues-Natural gas sales | $ | 6 | $ | — | Revenues-Natural gas sales | $ | — | $ | — | |||||||||||||
Revenues-Product sales and other | (4 | ) | (30 | ) | Revenues-Product sales and other | 26 | (8 | ) | ||||||||||||||||||||
Costs of sales | (1 | ) | 5 | Costs of sales | — | — | ||||||||||||||||||||||
Total | $ | 156 | $ | (102 | ) | Total | $ | 1 | $ | (25 | ) | Total | $ | 26 | $ | (8 | ) | |||||||||||
Nine Months Ended September 30, | Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||
Energy commodity derivative contracts | $ | (13 | ) | $ | (73 | ) | Revenues-Natural gas sales | $ | (6 | ) | $ | — | Revenues-Natural gas sales | $ | — | $ | — | |||||||||||
Revenues-Product sales and other | (36 | ) | (15 | ) | Revenues-Product sales and other | (6 | ) | (2 | ) | |||||||||||||||||||
Costs of sales | 7 | — | Costs of sales | — | — | |||||||||||||||||||||||
Total | $ | (13 | ) | $ | (73 | ) | Total | $ | (35 | ) | $ | (15 | ) | Total | $ | (6 | ) | $ | (2 | ) |
(a) | We expect to reclassify an approximate $33 million gain associated with energy commodity price risk management activities included in our Partners’ Capital as of September 30, 2014 into earnings during the next twelve months (when the associated forecasted sales and purchases are also expected to occur); however, actual amounts reclassified into earnings could vary materially as a result of changes in market prices. |
(b) | Amounts reclassified were the result of the hedged forecasted transactions actually affecting earnings (i.e., when the forecasted sales and purchases actually occurred). |
Derivatives not designated as accounting hedges | Location of gain/(loss) recognized in income on derivatives | Amount of gain/(loss) recognized in income on derivatives | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Energy commodity derivative contracts | Revenues-Natural gas sales | $ | 4 | $ | — | $ | (12 | ) | $ | — | ||||||||
Revenues-Product sales and other | 5 | (11 | ) | 4 | (7 | ) | ||||||||||||
Costs of sales | (3 | ) | 2 | 4 | 2 | |||||||||||||
Other expense (income) | — | (1 | ) | (2 | ) | (1 | ) | |||||||||||
Total | $ | 6 | $ | (10 | ) | $ | (6 | ) | $ | (6 | ) |
Net unrealized gains/(losses) on cash flow hedge derivatives | Foreign currency translation adjustments | Pension and other postretirement liability adjs. | Total Accumulated other comprehensive income/(loss) | ||||||||||||
Balance as of December 31, 2013 | $ | 24 | $ | (4 | ) | $ | 13 | $ | 33 | ||||||
Other comprehensive (loss) income before reclassifications | (13 | ) | (104 | ) | (4 | ) | (121 | ) | |||||||
Amounts reclassified from accumulated other comprehensive income | 35 | — | — | 35 | |||||||||||
Net current-period other comprehensive (loss) income | 22 | (104 | ) | (4 | ) | (86 | ) | ||||||||
Balance as of September 30, 2014 | $ | 46 | $ | (108 | ) | $ | 9 | $ | (53 | ) |
Net unrealized gains/(losses) on cash flow hedge derivatives | Foreign currency translation adjustments | Pension and other postretirement liability adjs. | Total Accumulated other comprehensive income/(loss) | ||||||||||||
Balance as of December 31, 2012 | $ | 66 | $ | 132 | $ | (30 | ) | $ | 168 | ||||||
Other comprehensive (loss) income before reclassifications | (72 | ) | (72 | ) | 32 | (112 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive income | 15 | — | — | 15 | |||||||||||
Net current-period other comprehensive (loss) income | (57 | ) | (72 | ) | 32 | (97 | ) | ||||||||
Balance as of September 30, 2013 | $ | 9 | $ | 60 | $ | 2 | $ | 71 |
▪ | Level 1 Inputs—quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date; |
▪ | Level 2 Inputs—inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability; and |
▪ | Level 3 Inputs—unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data). |
Balance Sheet asset fair value measurements using | Amounts not offset in the Balance Sheet | Net Amount | |||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Gross Amount | Financial Instruments | Cash Collateral Held(b) | ||||||||||||||||||||||
As of September 30, 2014 | |||||||||||||||||||||||||||
Energy commodity derivative contracts(a) | $ | 4 | $ | 59 | $ | 4 | $ | 67 | $ | (27 | ) | $ | — | $ | 40 | ||||||||||||
Interest rate swap agreements | $ | — | $ | 274 | $ | — | $ | 274 | $ | (44 | ) | $ | — | $ | 230 | ||||||||||||
As of December 31, 2013 | |||||||||||||||||||||||||||
Energy commodity derivative contracts(a) | $ | 4 | $ | 46 | $ | 30 | $ | 80 | $ | (44 | ) | $ | — | $ | 36 | ||||||||||||
Interest rate swap agreements | $ | — | $ | 217 | $ | — | $ | 217 | $ | (28 | ) | $ | — | $ | 189 |
Balance Sheet liability fair value measurements using | Amounts not offset in the Balance Sheet | Net Amount | |||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Gross Amount | Financial Instruments | Cash Collateral Posted(c) | ||||||||||||||||||||||
As of September 30, 2014 | |||||||||||||||||||||||||||
Energy commodity derivative contracts(a) | $ | (7 | ) | $ | (21 | ) | $ | (11 | ) | $ | (39 | ) | $ | 27 | $ | 14 | $ | 2 | |||||||||
Interest rate swap agreements | $ | — | $ | (70 | ) | $ | — | $ | (70 | ) | $ | 44 | $ | — | $ | (26 | ) | ||||||||||
As of December 31, 2013 | |||||||||||||||||||||||||||
Energy commodity derivative contracts(a) | $ | (6 | ) | $ | (31 | ) | $ | (31 | ) | $ | (68 | ) | $ | 44 | $ | 17 | $ | (7 | ) | ||||||||
Interest rate swap agreements | $ | — | $ | (116 | ) | $ | — | $ | (116 | ) | $ | 28 | $ | — | $ | (88 | ) |
(a) | Level 1 consists primarily of New York Mercantile Exchange natural gas futures. Level 2 consists primarily of OTC WTI swaps and natural gas basis swaps. Level 3 consists primarily of WTI options, NGL swaps and NGL options. |
(b) | Cash margin deposits held by us associated with our energy commodity contract positions and OTC swap agreements and reported within “Other current liabilities” on our accompanying consolidated balance sheets. |
(c) | Cash margin deposits posted by us associated with our energy commodity contract positions and OTC swap agreements and reported within “Other current assets” on our accompanying consolidated balance sheets. |
Significant unobservable inputs (Level 3) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Derivatives-net asset (liability) | |||||||||||||||
Beginning of Period | (31 | ) | $ | 18 | $ | (1 | ) | $ | 3 | ||||||
Total gains or (losses): | |||||||||||||||
Included in earnings | 15 | (14 | ) | (3 | ) | (8 | ) | ||||||||
Included in other comprehensive income (loss) | 10 | (2 | ) | — | (2 | ) | |||||||||
Purchases(a) | — | — | — | 18 | |||||||||||
Settlements | (1 | ) | (4 | ) | (3 | ) | (13 | ) | |||||||
End of Period | $ | (7 | ) | $ | (2 | ) | $ | (7 | ) | $ | (2 | ) | |||
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or (losses) relating to assets held at the reporting date | $ | 16 | $ | (13 | ) | $ | (4 | ) | $ | (11 | ) |
(a) | Nine month 2013 amount represents the purchase of Level 3 energy commodity derivative contracts associated with our May 1, 2013 Copano acquisition. |
September 30, 2014 | December 31, 2013 | ||||||||||||||
Carrying Value | Estimated Fair value | Carrying Value | Estimated Fair value | ||||||||||||
Total debt | $ | 22,981 | $ | 23,597 | $ | 21,128 | $ | 21,550 |
▪ | Natural Gas Pipelines—the sale, transport, processing, treating, fractionation, storage and gathering of natural gas and NGL; |
▪ | CO2—the production, sale and transportation of crude oil from fields in the Permian Basin of West Texas and the production, transportation and marketing of CO2 used as a flooding medium for recovering crude oil from mature oil fields; |
▪ | Products Pipelines—the transportation and terminaling of refined petroleum products (including gasoline, diesel fuel and jet fuel), NGL, crude oil and condensate, and bio-fuels; |
▪ | Terminals—the transloading and storing of refined petroleum products, crude oil, condensate, and bulk products, including coal, petroleum coke, cement, alumina, salt and other bulk chemicals; and |
▪ | Kinder Morgan Canada—the transportation of crude oil and refined products from Alberta, Canada to marketing terminals and refineries in British Columbia and the state of Washington. As further described in Note 2, Kinder Morgan Canada divested its interest in the Express pipeline system effective March 14, 2013. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues | |||||||||||||||
Natural Gas Pipelines | |||||||||||||||
Revenues from external customers | $ | 2,399 | $ | 2,023 | $ | 6,685 | $ | 5,088 | |||||||
Intersegment revenues | — | — | 2 | — | |||||||||||
CO2 | 508 | 456 | 1,445 | 1,345 | |||||||||||
Products Pipelines | 520 | 474 | 1,578 | 1,371 | |||||||||||
Terminals | |||||||||||||||
Revenues from external customers | 433 | 354 | $ | 1,244 | $ | 1,034 | |||||||||
Intersegment revenues | — | — | 1 | 1 | |||||||||||
Kinder Morgan Canada | 73 | 74 | 210 | 221 | |||||||||||
Total segment revenues | 3,933 | 3,381 | 11,165 | 9,060 | |||||||||||
Less: Total intersegment revenues | — | — | (3 | ) | (1 | ) | |||||||||
Total consolidated revenues | $ | 3,933 | $ | 3,381 | $ | 11,162 | $ | 9,059 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Segment EBDA(a) | |||||||||||||||
Natural Gas Pipelines(b) | $ | 863 | $ | 635 | $ | 2,221 | $ | 2,315 | |||||||
CO2 | 388 | 340 | 1,083 | 1,040 | |||||||||||
Products Pipelines(c) | 222 | 202 | 633 | 399 | |||||||||||
Terminals | 249 | 217 | 696 | 610 | |||||||||||
Kinder Morgan Canada(d) | 50 | 43 | 138 | 286 | |||||||||||
Segment EBDA | 1,772 | 1,437 | 4,771 | 4,650 | |||||||||||
Total segment DD&A expense | (427 | ) | (377 | ) | (1,234 | ) | (1,062 | ) | |||||||
Total segment amortization of excess cost of investments | (3 | ) | (3 | ) | (11 | ) | (7 | ) | |||||||
General and administrative expense | (126 | ) | (136 | ) | (411 | ) | (433 | ) | |||||||
Interest expense, net of unallocable interest income | (238 | ) | (220 | ) | (708 | ) | (637 | ) | |||||||
Unallocable income tax expense | (2 | ) | (4 | ) | (8 | ) | (10 | ) | |||||||
Loss from discontinued operations | — | — | — | (2 | ) | ||||||||||
Total consolidated net income | $ | 976 | $ | 697 | $ | 2,399 | $ | 2,499 |
September 30, 2014 | December 31, 2013 | ||||||
Assets | |||||||
Natural Gas Pipelines | $ | 26,140 | $ | 25,721 | |||
CO2 | 3,224 | 2,954 | |||||
Products Pipelines | 5,906 | 5,488 | |||||
Terminals | 7,727 | 6,124 | |||||
Kinder Morgan Canada | 1,620 | 1,678 | |||||
Total segment assets | 44,617 | 41,965 | |||||
Corporate assets(e) | 723 | 799 | |||||
Total Consolidated Assets | $ | 45,340 | $ | 42,764 |
(a) | Includes revenues, earnings from equity investments, allocable interest income, and other, net, less operating expenses, allocable income taxes, and other income, net. Operating expenses include natural gas purchases and other costs of sales, operations and maintenance expenses, and taxes, other than income taxes. |
(b) | Nine month 2013 amount includes a $558 million non-cash gain from the remeasurement of our previously held equity interest in Eagle Ford to fair value (discussed further in Note 2 “Acquisitions and Divestitures—Acquisitions—Other”). The three month and nine month 2014 amounts include a $198 million increase associated with the early termination of a long-term natural gas transportation contract on our Kinder Morgan Louisiana pipeline system. |
(c) | Nine month 2013 amount includes a $177 million increase in operating expense associated with adjustments to legal liabilities. |
(d) | Three and nine month 2013 amounts include a $1 million decrease and a $140 million increase, respectively, from after-tax loss and gain amounts on the sale of our investments in the Express pipeline system. |
(e) | Includes cash and cash equivalents; margin and restricted deposits; unallocable interest receivable, prepaid assets and deferred charges, and risk management assets related to debt fair value adjustments. |
Condensed Consolidating Statements of Income and Comprehensive Income for the Three Months ended September 30, 2014 (In Millions) (Unaudited) | |||||||||||||||||||
Parent Guarantor | Subsidiary Issuers | Non-guarantor Subsidiaries | Eliminations | Consolidated KMP | |||||||||||||||
Total Revenues | $ | — | $ | — | $ | 3,933 | $ | — | $ | 3,933 | |||||||||
Operating Costs, Expenses and Other | |||||||||||||||||||
Costs of sales | — | — | 1,640 | — | 1,640 | ||||||||||||||
Depreciation, depletion and amortization | — | — | 427 | — | 427 | ||||||||||||||
Other operating expenses | — | 9 | 696 | — | 705 | ||||||||||||||
Total Operating Costs, Expenses and Other | — | 9 | 2,763 | — | 2,772 | ||||||||||||||
Operating (Loss) Income | — | (9 | ) | 1,170 | — | 1,161 | |||||||||||||
Other Income (Expense), Net | 966 | 46 | (159 | ) | (1,014 | ) | (161 | ) | |||||||||||
Income Before Income Taxes | 966 | 37 | 1,011 | (1,014 | ) | 1,000 | |||||||||||||
Income Tax Expense | (3 | ) | — | (21 | ) | — | (24 | ) | |||||||||||
Net Income | 963 | 37 | 990 | (1,014 | ) | 976 | |||||||||||||
Net Income Attributable to Noncontrolling Interests | — | — | (13 | ) | — | (13 | ) | ||||||||||||
Net Income Attributable to KMEP | $ | 963 | $ | 37 | $ | 977 | $ | (1,014 | ) | $ | 963 | ||||||||
Net Income | $ | 963 | $ | 37 | $ | 990 | $ | (1,014 | ) | $ | 976 | ||||||||
Total Other Comprehensive Income | 57 | — | 57 | (57 | ) | 57 | |||||||||||||
Comprehensive Income | 1,020 | 37 | 1,047 | (1,071 | ) | 1,033 | |||||||||||||
Comprehensive Income Attributable to Noncontrolling Interests | — | — | (13 | ) | — | (13 | ) | ||||||||||||
Comprehensive Income Attributable to KMEP | $ | 1,020 | $ | 37 | $ | 1,034 | $ | (1,071 | ) | $ | 1,020 |
Condensed Consolidating Statements of Income and Comprehensive Income for the Three Months ended September 30, 2013 (In Millions) (Unaudited) | |||||||||||||||||||
Parent Guarantor | Subsidiary Issuers | Non-guarantor Subsidiaries | Eliminations | Consolidated KMP | |||||||||||||||
Total Revenues | $ | — | $ | — | $ | 3,381 | $ | — | $ | 3,381 | |||||||||
Operating Costs, Expenses and Other | |||||||||||||||||||
Costs of sales | — | — | 1,531 | — | 1,531 | ||||||||||||||
Depreciation, depletion and amortization | — | (2 | ) | 379 | — | 377 | |||||||||||||
Other operating expenses | — | 7 | 599 | — | 606 | ||||||||||||||
Total Operating Costs, Expenses and Other | — | 5 | 2,509 | — | 2,514 | ||||||||||||||
Operating (Loss) Income | — | (5 | ) | 872 | — | 867 | |||||||||||||
Other Income, Net | 693 | 40 | (148 | ) | (735 | ) | (150 | ) | |||||||||||
Income Before Income Taxes | 693 | 35 | 724 | (735 | ) | 717 | |||||||||||||
Income Tax Expense | (4 | ) | — | (16 | ) | — | (20 | ) | |||||||||||
Net Income | 689 | 35 | 708 | (735 | ) | 697 | |||||||||||||
Net Income Attributable to Noncontrolling Interests | — | — | (8 | ) | — | (8 | ) | ||||||||||||
Net Income Attributable to KMEP | $ | 689 | $ | 35 | $ | 700 | $ | (735 | ) | $ | 689 | ||||||||
Net Income | $ | 689 | $ | 35 | $ | 708 | $ | (735 | ) | $ | 697 | ||||||||
Total Other Comprehensive (Loss) | (4 | ) | — | (4 | ) | 4 | (4 | ) | |||||||||||
Comprehensive Income | 685 | 35 | 704 | (731 | ) | 693 | |||||||||||||
Comprehensive Income Attributable to Noncontrolling Interests | — | — | (8 | ) | — | (8 | ) | ||||||||||||
Comprehensive Income Attributable to KMEP | $ | 685 | $ | 35 | $ | 696 | $ | (731 | ) | $ | 685 |
Condensed Consolidating Statements of Income and Comprehensive Income for the Nine Months ended September 30, 2014 (In Millions) (Unaudited) | |||||||||||||||||||
Parent Guarantor | Subsidiary Issuers | Non-guarantor Subsidiaries | Eliminations | Consolidated KMP | |||||||||||||||
Total Revenues | $ | — | $ | — | $ | 11,162 | $ | — | $ | 11,162 | |||||||||
Operating Costs, Expenses and Other | |||||||||||||||||||
Costs of sales | — | — | 4,880 | — | 4,880 | ||||||||||||||
Depreciation, depletion and amortization | — | — | 1,234 | — | 1,234 | ||||||||||||||
Other operating expenses | — | 24 | 2,075 | — | 2,099 | ||||||||||||||
Total Operating Costs, Expenses and Other | — | 24 | 8,189 | — | 8,213 | ||||||||||||||
Operating (Loss) Income | — | (24 | ) | 2,973 | — | 2,949 | |||||||||||||
Other Income (Expense), Net | 2,378 | 124 | (482 | ) | (2,506 | ) | (486 | ) | |||||||||||
Income Before Income Taxes | 2,378 | 100 | 2,491 | (2,506 | ) | 2,463 | |||||||||||||
Income Tax Expense | (8 | ) | — | (56 | ) | — | (64 | ) | |||||||||||
Net Income | 2,370 | 100 | 2,435 | (2,506 | ) | 2,399 | |||||||||||||
Net Income Attributable to Noncontrolling Interests | — | — | (29 | ) | — | (29 | ) | ||||||||||||
Net Income Attributable to KMEP | $ | 2,370 | $ | 100 | $ | 2,406 | $ | (2,506 | ) | $ | 2,370 | ||||||||
Net Income | $ | 2,370 | $ | 100 | $ | 2,435 | $ | (2,506 | ) | $ | 2,399 | ||||||||
Total Other Comprehensive (Loss) | (86 | ) | — | (87 | ) | 86 | (87 | ) | |||||||||||
Comprehensive Income | 2,284 | 100 | 2,348 | (2,420 | ) | 2,312 | |||||||||||||
Comprehensive Income Attributable to Noncontrolling Interests | — | — | (28 | ) | — | (28 | ) | ||||||||||||
Comprehensive Income Attributable to KMEP | $ | 2,284 | $ | 100 | $ | 2,320 | $ | (2,420 | ) | $ | 2,284 |
Condensed Consolidating Statements of Income and Comprehensive Income for the Nine Months ended September 30, 2013 (In Millions) (Unaudited) | |||||||||||||||||||
Parent Guarantor | Subsidiary Issuers | Non-guarantor Subsidiaries | Eliminations | Consolidated KMP | |||||||||||||||
Total Revenues | $ | — | $ | — | $ | 9,059 | $ | — | $ | 9,059 | |||||||||
Operating Costs, Expenses and Other | |||||||||||||||||||
Costs of sales | — | — | 3,736 | — | 3,736 | ||||||||||||||
Depreciation, depletion and amortization | — | — | 1,062 | — | 1,062 | ||||||||||||||
Other operating expenses | — | 33 | 1,976 | — | 2,009 | ||||||||||||||
Total Operating Costs, Expenses and Other | — | 33 | 6,774 | — | 6,807 | ||||||||||||||
Operating (Loss) Income | — | (33 | ) | 2,285 | — | 2,252 | |||||||||||||
Other Income, Net | 2,482 | 75 | 389 | (2,550 | ) | 396 | |||||||||||||
Income from Continuing Operations Before Income Taxes | 2,482 | 42 | 2,674 | (2,550 | ) | 2,648 | |||||||||||||
Income Tax Expense | (10 | ) | — | (137 | ) | — | (147 | ) | |||||||||||
Income from Continuing Operations | 2,472 | 42 | 2,537 | (2,550 | ) | 2,501 | |||||||||||||
Loss from Discontinued Operations | — | — | (2 | ) | — | (2 | ) | ||||||||||||
Net Income | 2,472 | 42 | 2,535 | (2,550 | ) | 2,499 | |||||||||||||
Net Income Attributable to Noncontrolling Interests | — | — | (27 | ) | — | (27 | ) | ||||||||||||
Net Income Attributable to KMEP | $ | 2,472 | $ | 42 | $ | 2,508 | $ | (2,550 | ) | $ | 2,472 | ||||||||
Net Income | $ | 2,472 | $ | 42 | $ | 2,535 | $ | (2,550 | ) | $ | 2,499 | ||||||||
Total Other Comprehensive (Loss) | (97 | ) | — | (98 | ) | 97 | (98 | ) | |||||||||||
Comprehensive Income | 2,375 | 42 | 2,437 | (2,453 | ) | 2,401 | |||||||||||||
Comprehensive Income Attributable to Noncontrolling Interests | — | — | (26 | ) | — | (26 | ) | ||||||||||||
Comprehensive Income Attributable to KMEP | $ | 2,375 | $ | 42 | $ | 2,411 | $ | (2,453 | ) | $ | 2,375 |
Condensed Consolidating Balance Sheets as of September 30, 2014 (In Millions) (Unaudited) | |||||||||||||||||||
Parent Guarantor | Subsidiary Issuers | Non-guarantor Subsidiaries | Eliminations | Consolidated KMP | |||||||||||||||
ASSETS | |||||||||||||||||||
Cash and cash equivalents | $ | 42 | $ | — | $ | 226 | $ | — | $ | 268 | |||||||||
All other current assets | 3,727 | 2 | 2,163 | (3,576 | ) | 2,316 | |||||||||||||
Property, plant and equipment, net | — | 15 | 29,827 | — | 29,842 | ||||||||||||||
Investments | — | — | 2,400 | — | 2,400 | ||||||||||||||
Investments in subsidiaries | 13,772 | 3,745 | — | (17,517 | ) | — | |||||||||||||
Goodwill | — | 920 | 5,790 | — | 6,710 | ||||||||||||||
Notes receivable from affiliates | 19,083 | — | — | (19,083 | ) | — | |||||||||||||
Other non-current assets | 265 | — | 3,539 | — | 3,804 | ||||||||||||||
Total Assets | $ | 36,889 | $ | 4,682 | $ | 43,945 | $ | (40,176 | ) | $ | 45,340 | ||||||||
LIABILITIES AND PARTNERS’ CAPITAL | |||||||||||||||||||
Liabilities | |||||||||||||||||||
Current portion of debt | $ | 959 | $ | — | $ | — | $ | — | $ | 959 | |||||||||
All other current liabilities | 152 | 108 | 6,338 | (3,576 | ) | 3,022 | |||||||||||||
Total long-term debt | 18,091 | 388 | 3,543 | — | 22,022 | ||||||||||||||
Notes payable to affiliates | — | 793 | 18,290 | (19,083 | ) | — | |||||||||||||
Deferred income taxes | — | 2 | 294 | — | 296 | ||||||||||||||
Other long-term liabilities and deferred credits | 132 | 1 | 857 | — | 990 | ||||||||||||||
Total Liabilities | 19,334 | 1,292 | 29,322 | (22,659 | ) | 27,289 | |||||||||||||
Partners’ Capital | |||||||||||||||||||
Total KMEP Partners’ Capital | 17,555 | 3,390 | 14,127 | (17,517 | ) | 17,555 | |||||||||||||
Noncontrolling interests | — | — | 496 | — | 496 | ||||||||||||||
Total Partners’ Capital | 17,555 | 3,390 | 14,623 | (17,517 | ) | 18,051 | |||||||||||||
Total Liabilities and Partners’ Capital | $ | 36,889 | $ | 4,682 | $ | 43,945 | $ | (40,176 | ) | $ | 45,340 |
Condensed Consolidating Balance Sheets as of December 31, 2013 (In Millions) | |||||||||||||||||||
Parent Guarantor | Subsidiary Issuers | Non-guarantor Subsidiaries | Eliminations | Consolidated KMP | |||||||||||||||
ASSETS | |||||||||||||||||||
Cash and cash equivalents | $ | 10 | $ | 1 | $ | 393 | $ | — | $ | 404 | |||||||||
All other current assets | 3,071 | 13 | 2,151 | (2,971 | ) | 2,264 | |||||||||||||
Property, plant and equipment, net | — | 170 | 27,235 | — | 27,405 | ||||||||||||||
Investments | — | — | 2,233 | — | 2,233 | ||||||||||||||
Investments in subsidiaries | 13,931 | 4,430 | — | (18,361 | ) | — | |||||||||||||
Goodwill | — | 813 | 5,734 | — | 6,547 | ||||||||||||||
Notes receivable from affiliates | 17,284 | — | — | (17,284 | ) | — | |||||||||||||
Other non-current assets | 233 | — | 3,678 | — | 3,911 | ||||||||||||||
Total Assets | $ | 34,529 | $ | 5,427 | $ | 41,424 | $ | (38,616 | ) | $ | 42,764 | ||||||||
LIABILITIES AND PARTNERS’ CAPITAL | |||||||||||||||||||
Liabilities | |||||||||||||||||||
Current portion of debt | $ | 1,504 | $ | — | $ | — | $ | — | $ | 1,504 | |||||||||
All other current liabilities | 407 | 107 | 5,530 | (2,971 | ) | 3,073 | |||||||||||||
Total long-term debt | 15,644 | 393 | 3,587 | — | 19,624 | ||||||||||||||
Notes payable to affiliates | — | 907 | 16,377 | (17,284 | ) | — | |||||||||||||
Deferred income taxes | — | 2 | 283 | — | 285 | ||||||||||||||
Other long-term liabilities and deferred credits | 173 | — | 884 | — | 1,057 | ||||||||||||||
Total Liabilities | 17,728 | 1,409 | 26,661 | (20,255 | ) | 25,543 | |||||||||||||
Partners’ Capital | |||||||||||||||||||
Total KMEP Partners’ Capital | 16,801 | 4,018 | 14,343 | (18,361 | ) | 16,801 | |||||||||||||
Noncontrolling interests | — | — | 420 | — | 420 | ||||||||||||||
Total Partners’ Capital | 16,801 | 4,018 | 14,763 | (18,361 | ) | 17,221 | |||||||||||||
Total Liabilities and Partners’ Capital | $ | 34,529 | $ | 5,427 | $ | 41,424 | $ | (38,616 | ) | $ | 42,764 |
Condensed Consolidating Statements of Cash Flow for the Nine Months ended September 30, 2014 (In Millions) (Unaudited) | |||||||||||||||||||
Parent Guarantor | Subsidiary Issuers | Non-guarantor Subsidiaries | Eliminations | Consolidated KMP | |||||||||||||||
Net Cash Provided by (Used in) Operating Activities | $ | 2,406 | $ | (35 | ) | $ | 4,352 | $ | (3,247 | ) | $ | 3,476 | |||||||
Cash Flows From Investing Activities | |||||||||||||||||||
Acquisitions of assets and investments, net of cash acquired | — | — | (1,100 | ) | — | (1,100 | ) | ||||||||||||
Capital expenditures | — | (64 | ) | (2,738 | ) | 199 | (2,603 | ) | |||||||||||
Contributions to investments | — | — | (319 | ) | — | (319 | ) | ||||||||||||
Distributions from equity investments in excess of cumulative earnings | — | — | 53 | — | 53 | ||||||||||||||
Funding (to) from affiliates | (2,608 | ) | 121 | 155 | 2,332 | — | |||||||||||||
Natural gas storage and natural gas and liquids line-fill | — | — | 22 | — | 22 | ||||||||||||||
Sale, casualty and transfer of property, plant and equipment, investments and other net assets, net of removal costs | — | 199 | 16 | (199 | ) | 16 | |||||||||||||
Other, net | (1 | ) | — | (6 | ) | — | (7 | ) | |||||||||||
Net Cash (Used in) Provided by Investing Activities | (2,609 | ) | 256 | (3,917 | ) | 2,332 | (3,938 | ) | |||||||||||
Cash Flows From Financing Activities | |||||||||||||||||||
Issuance of debt | 9,269 | — | — | — | 9,269 | ||||||||||||||
Payment of debt | (7,426 | ) | — | (1 | ) | — | (7,427 | ) | |||||||||||
Debt issue costs | (20 | ) | — | — | — | (20 | ) | ||||||||||||
Funding (to) from affiliates | (46 | ) | (222 | ) | 2,600 | (2,332 | ) | — | |||||||||||
Proceeds from issuance of common units | 1,044 | — | — | — | 1,044 | ||||||||||||||
Proceeds from issuance of i-units | 134 | — | — | — | 134 | ||||||||||||||
Contributions from noncontrolling interests | — | — | 94 | — | 94 | ||||||||||||||
Distributions to partners and noncontrolling interests | (2,718 | ) | — | (3,286 | ) | 3,247 | (2,757 | ) | |||||||||||
Other, net | (2 | ) | — | — | — | (2 | ) | ||||||||||||
Net Cash Provided by (Used in) Financing Activities | 235 | (222 | ) | (593 | ) | 915 | 335 | ||||||||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | — | — | (9 | ) | — | (9 | ) | ||||||||||||
Net increase (decrease) in Cash and Cash Equivalents | 32 | (1 | ) | (167 | ) | — | (136 | ) | |||||||||||
Cash and Cash Equivalents, beginning of period | 10 | 1 | 393 | — | 404 | ||||||||||||||
Cash and Cash Equivalents, end of period | $ | 42 | $ | — | $ | 226 | $ | — | $ | 268 |
Condensed Consolidating Statements of Cash Flow for the Nine Months ended September 30, 2013 (In Millions) (Unaudited) | |||||||||||||||||||
Parent Guarantor | Subsidiary Issuers | Non-guarantor Subsidiaries | Eliminations | Consolidated KMP | |||||||||||||||
Net Cash Provided by (Used in) Operating Activities | $ | 2,107 | $ | (2 | ) | $ | 3,352 | $ | (2,761 | ) | $ | 2,696 | |||||||
Cash Flows From Investing Activities | |||||||||||||||||||
Payment to KMI for March 2013 drop-down asset group | — | — | (994 | ) | — | (994 | ) | ||||||||||||
Acquisitions of assets and investments, net of cash acquired | — | 5 | (297 | ) | — | (292 | ) | ||||||||||||
Capital expenditures | — | (107 | ) | (2,053 | ) | — | (2,160 | ) | |||||||||||
Proceeds from sale of investments in Express pipeline system | — | — | 402 | — | 402 | ||||||||||||||
Contributions to investments | — | — | (163 | ) | — | (163 | ) | ||||||||||||
Distributions from equity investments in excess of cumulative earnings | — | — | 48 | — | 48 | ||||||||||||||
Funding to affiliates | (4,807 | ) | (242 | ) | (1,291 | ) | 6,340 | — | |||||||||||
Sale or casualty of property, plant and equipment, investments and other net assets, net of removal costs | — | — | 61 | — | 61 | ||||||||||||||
Other, net | 4 | — | 3 | — | 7 | ||||||||||||||
Net Cash Used in Investing Activities | (4,803 | ) | (344 | ) | (4,284 | ) | 6,340 | (3,091 | ) | ||||||||||
Cash Flows From Financing Activities | |||||||||||||||||||
Issuance of debt | 7,901 | — | 14 | — | 7,915 | ||||||||||||||
Payment of debt | (5,621 | ) | (854 | ) | (99 | ) | — | (6,574 | ) | ||||||||||
Debt issue costs | (22 | ) | — | — | — | (22 | ) | ||||||||||||
Funding from affiliates | 1,391 | 1,201 | 3,748 | (6,340 | ) | — | |||||||||||||
Proceeds from issuance of common units | 1,080 | — | — | — | 1,080 | ||||||||||||||
Proceeds from issuance of i-units | 145 | — | — | — | 145 | ||||||||||||||
Contributions from noncontrolling interests | — | — | 128 | — | 128 | ||||||||||||||
Contributions from General Partner | 38 | — | — | — | 38 | ||||||||||||||
Pre-acquisition contributions from KMI to March 2013 drop-down asset group | — | — | 35 | — | 35 | ||||||||||||||
Distributions to partners and noncontrolling interests | (2,302 | ) | — | (2,791 | ) | 2,761 | (2,332 | ) | |||||||||||
Other, net | — | — | (1 | ) | — | (1 | ) | ||||||||||||
Net Cash Provided by Financing Activities | 2,610 | 347 | 1,034 | (3,579 | ) | 412 | |||||||||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | — | — | (12 | ) | — | (12 | ) | ||||||||||||
Net (decrease) increase in Cash and Cash Equivalents | (86 | ) | 1 | 90 | — | 5 | |||||||||||||
Cash and Cash Equivalents, beginning of period | 95 | — | 434 | — | 529 | ||||||||||||||
Cash and Cash Equivalents, end of period | $ | 9 | $ | 1 | $ | 524 | $ | — | $ | 534 |
Distributable Cash Flow | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In millions) | |||||||||||||||
Net Income | $ | 976 | $ | 697 | $ | 2,399 | $ | 2,499 | |||||||
Less: Certain items - combined income(a) | (230 | ) | (33 | ) | (167 | ) | (553 | ) | |||||||
Net Income before certain items | 746 | 664 | 2,232 | 1,946 | |||||||||||
Less: Net Income before certain items attributable to noncontrolling interests(b) | (11 | ) | (8 | ) | (28 | ) | (22 | ) | |||||||
Net Income before certain items attributable to KMEP | 735 | 656 | 2,204 | 1,924 | |||||||||||
Less: General Partner’s interest in Net Income before certain items(c) | (473 | ) | (436 | ) | (1,392 | ) | (1,255 | ) | |||||||
Limited Partners’ interest in Net Income before certain items | 262 | 220 | 812 | 669 | |||||||||||
Depreciation, depletion and amortization(d)(f) | 452 | 400 | 1,309 | 1,117 | |||||||||||
Book (cash) taxes paid, net | 20 | 22 | 36 | 34 | |||||||||||
Incremental contributions from equity investments in the Express Pipeline and Endeavor Gathering LLC | (6 | ) | 4 | (4 | ) | (1 | ) | ||||||||
Sustaining capital expenditures(e)(f) | (121 | ) | (92 | ) | (292 | ) | (210 | ) | |||||||
Distributable cash flow before certain items | $ | 607 | $ | 554 | $ | 1,861 | $ | 1,609 |
(a) | Consists of certain items summarized in footnotes (b) through (d) and (f) through (j) to the “—Results of Operations” table included below (and described in more detail below in the footnotes to tables included in both our management’s discussion and analysis of segment results and “—Other”). |
(b) | Equal to “Net income attributable to noncontrolling interests;” in addition, (i) three and nine month 2014 amounts exclude a $2 million decrease in income attributable to our noncontrolling interests related to the combined effect from all of the three and nine month 2014 certain items disclosed in the footnotes to the “—Results of Operations” table included below; and (ii) nine month 2013 |
(c) | Amounts are net of waived incentive distributions of $33 million and $25 million for the three months ended September 30, 2014 and 2013, respectively, and $99 million and $54 million for the nine months ended September 30, 2014 and 2013, respectively, related to certain acquisitions. |
(d) | Three and nine month 2014 amounts include expense amounts of $22 million and $64 million, respectively, and three and nine month 2013 amounts include expense amounts of $20 million and $67 million, respectively, for our proportionate share of the DD&A expenses of certain unconsolidated joint ventures. Nine month 2013 amount also excludes a $19 million expense amount attributable to our March 2013 drop-down asset group for periods prior to our acquisition. |
(e) | Three and nine month 2014 amounts include expenditures of $1 million and $4 million, respectively, and three and nine month 2013 amounts each include expenditures of $1 million and $2 million, respectively, for our proportionate share of the sustaining capital expenditures of certain unconsolidated joint ventures. |
(f) | In order to more closely track the cash distributions we receive from our unconsolidated joint ventures, our calculation of DCF (i) adds back our proportionate share of the DD&A expenses of certain joint ventures; and (ii) subtracts our proportionate share of the sustaining expenditures of the corresponding joint ventures (i.e., the same equity investees for which we add back DD&A as discussed in footnote (d)). |
Results of Operations | ||||||||||||||
Three Months Ended September 30, | Earnings increase/(decrease) | |||||||||||||
2014 | 2013 | |||||||||||||
(In millions, except percentages) | ||||||||||||||
Segment EBDA(a) | ||||||||||||||
Natural Gas Pipelines | $ | 863 | $ | 635 | $ | 228 | 36 | % | ||||||
CO2 | 388 | 340 | 48 | 14 | % | |||||||||
Products Pipelines | 222 | 202 | 20 | 10 | % | |||||||||
Terminals | 249 | 217 | 32 | 15 | % | |||||||||
Kinder Morgan Canada | 50 | 43 | 7 | 16 | % | |||||||||
Segment EBDA(b) | 1,772 | 1,437 | 335 | 23 | % | |||||||||
DD&A expense | (427 | ) | (377 | ) | (50 | ) | (13 | )% | ||||||
Amortization of excess cost of equity investments | (3 | ) | (3 | ) | — | — | % | |||||||
General and administrative expense(c) | (126 | ) | (136 | ) | 10 | 7 | % | |||||||
Interest expense, net of unallocable interest income(d) | (238 | ) | (220 | ) | (18 | ) | (8 | )% | ||||||
Unallocable income tax expense | (2 | ) | (4 | ) | 2 | 50 | % | |||||||
Income from continuing operations | 976 | 697 | 279 | 40 | % | |||||||||
Net Income | 976 | 697 | 279 | 40 | % | |||||||||
Net Income attributable to noncontrolling interests(e) | (13 | ) | (8 | ) | (5 | ) | (63 | )% | ||||||
Net Income attributable to KMEP | $ | 963 | $ | 689 | $ | 274 | 40 | % |
Results of Operations | ||||||||||||||
Nine Months Ended September 30, | Earnings increase/(decrease) | |||||||||||||
2014 | 2013 | |||||||||||||
(In millions, except percentages) | ||||||||||||||
Segment EBDA(a) | ||||||||||||||
Natural Gas Pipelines | $ | 2,221 | $ | 2,315 | $ | (94 | ) | (4 | )% | |||||
CO2 | 1,083 | 1,040 | 43 | 4 | % | |||||||||
Products Pipelines | 633 | 399 | 234 | 59 | % | |||||||||
Terminals | 696 | 610 | 86 | 14 | % | |||||||||
Kinder Morgan Canada | 138 | 286 | (148 | ) | (52 | )% | ||||||||
Segment EBDA(f) | 4,771 | 4,650 | 121 | 3 | % | |||||||||
DD&A expense(g) | (1,234 | ) | (1,062 | ) | (172 | ) | (16 | )% | ||||||
Amortization of excess cost of equity investments | (11 | ) | (7 | ) | (4 | ) | (57 | )% | ||||||
General and administrative expense(h) | (411 | ) | (433 | ) | 22 | 5 | % | |||||||
Interest expense, net of unallocable interest income(i) | (708 | ) | (637 | ) | (71 | ) | (11 | )% | ||||||
Unallocable income tax expense | (8 | ) | (10 | ) | 2 | 20 | % | |||||||
Income from continuing operations | 2,399 | 2,501 | (102 | ) | (4 | )% | ||||||||
Loss from discontinued operations(j) | — | (2 | ) | 2 | 100 | % | ||||||||
Net Income | 2,399 | 2,499 | (100 | ) | (4 | )% | ||||||||
Net Income attributable to noncontrolling interests(k) | (29 | ) | (27 | ) | (2 | ) | (7 | )% | ||||||
Net Income attributable to KMEP | $ | 2,370 | $ | 2,472 | $ | (102 | ) | (4 | )% |
(a) | Includes revenues, earnings from equity investments, allocable interest income and other, net, less operating expenses, allocable income taxes, and other income, net. Operating expenses include natural gas purchases and other costs of sales, operations and maintenance expenses, and taxes, other than income taxes. |
(b) | 2014 and 2013 amounts include increases in earnings of $229 million and $35 million, respectively, related to the combined effect from all of the three month 2014 and 2013 certain items impacting continuing operations and disclosed below in our management discussion and analysis of segment results. |
(c) | 2014 and 2013 amounts include a decrease in expense of $1 million and an increase in expense of $3 million, respectively, related to the combined effect from all of the three month 2014 and 2013 certain items related to general and administrative expenses disclosed below in “—Other.” |
(d) | 2013 amount includes a decrease in expense of $1 million related to the combined effect from all of the three month 2013 certain items related to interest expense, net of unallocable interest income disclosed below in “—Other.” |
(e) | 2014 amount includes a $2 million increase in net income attributable to our noncontrolling interests, related to the combined effect from all of the three month 2014 certain items disclosed below in both our management’s discussion and analysis of segment results and “—Other.” |
(f) | 2014 and 2013 amounts include increases in earnings of $181 million and $635 million, respectively, related to the combined effect from all of the nine month 2014 and 2013 certain items impacting continuing operations and disclosed below in our management discussion and analysis of segment results. |
(g) | 2013 amount includes a certain item resulting in a $19 million increase in expense attributable to our March 2013 drop-down asset group for periods prior to our March 1, 2013 acquisition date. |
(h) | 2014 and 2013 amounts include increases in expense of $5 million and $49 million, respectively, related to the combined effect from all of the nine month 2014 and 2013 certain items related to general and administrative expenses disclosed below in “—Other.” |
(i) | 2014 and 2013 amounts include increases in expense of $9 million and $12 million, respectively, related to the combined effect from all of the nine month 2014 and 2013 certain items related to interest expense, net of unallocable interest income disclosed below in “—Other.” |
(j) | 2013 amount represents a certain item incremental loss related to the sale of our FTC Natural Gas Pipelines disposal group effective November 1, 2012. |
(k) | 2014 and 2013 amounts include increases of $1 million and $5 million, respectively, in net income attributable to our noncontrolling interests, related to the combined effect from all of the nine month 2014 and 2013 certain items disclosed below in both our management’s discussion and analysis of segment results and “—Other.” |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In millions, except operating statistics) | |||||||||||||||
Revenues(a) | $ | 2,399 | $ | 2,023 | $ | 6,687 | $ | 5,088 | |||||||
Operating expenses(b) | (1,574 | ) | (1,469 | ) | (4,584 | ) | (3,508 | ) | |||||||
Other (expense) income(c) | (4 | ) | 36 | (1 | ) | 36 | |||||||||
Earnings from equity investments(d) | 40 | 42 | 117 | 135 | |||||||||||
Interest income and Other, net(e) | 4 | 5 | 10 | 570 | |||||||||||
Income tax expense | (2 | ) | (2 | ) | (8 | ) | (6 | ) | |||||||
EBDA from continuing operations | 863 | 635 | 2,221 | 2,315 | |||||||||||
Discontinued operations(f) | — | — | — | (2 | ) | ||||||||||
Certain items, net(a)(b)(c)(d)(e)(f) | (202 | ) | (27 | ) | (195 | ) | (642 | ) | |||||||
EBDA before certain items | $ | 661 | $ | 608 | $ | 2,026 | $ | 1,671 | |||||||
Change from prior period | Increase/(Decrease) | ||||||||||||||
Revenues before certain items(a) | $ | 161 | 8 | % | $ | 1,501 | 30 | % | |||||||
EBDA before certain items | $ | 53 | 9 | % | $ | 355 | 21 | % | |||||||
Natural gas transport volumes (BBtu/d)(g) | 17,562 | 15,998 | 17,481 | 16,216 | |||||||||||
Natural gas sales volumes (BBtu/d)(h) | 2,446 | 2,510 | 2,303 | 2,429 | |||||||||||
Natural gas gathering volumes (BBtu/d)(i) | 3,170 | 3,029 | 3,046 | 2,994 |
(a) | Three and nine month 2014 amounts include increases of $8 million and $1 million, respectively, and three and nine month 2013 amounts include decreases of $9 million and $10 million, respectively, all related to derivative contracts used to hedge forecasted natural gas, NGL and crude oil sales. Three and nine month 2014 amounts also includes a $198 million increase associated with the early termination of a long-term natural gas transportation contract on our Kinder Morgan Louisiana pipeline system. Nine month 2013 amount also includes a $111 million increase attributable to our March 2013 drop-down asset group for periods prior to our March 1, 2013 acquisition date. |
(b) | Nine month 2013 amount includes an increase in expense of $30 million attributable to our March 2013 drop-down asset group for periods prior to our March 1, 2013 acquisition date, and a combined $1 million increase in expense from other certain items. |
(c) | Three and nine month 2014 amounts include a $4 million loss amount, and the three and nine month 2013 amounts include a $36 million gain related to the sale of certain Gulf Coast offshore and onshore TGP supply facilities. |
(d) | Nine month 2013 amount includes a decrease in earnings of $19 million attributable to our March 2013 drop-down asset group for periods prior to our March 1, 2013 acquisition date, and a combined $1 million decrease in earnings from all other certain items. |
(e) | Nine month 2013 amount includes a $558 million gain from the remeasurement of our previously held 50% equity interest in Eagle Ford to fair value. |
(f) | Nine month 2013 amount represents an incremental loss from the sale of our FTC Natural Gas Pipelines disposal group’s net assets. |
(g) | Includes 100% of pipeline volumes for our wholly-owned assets as well as our joint venture assets as if they were wholly-owned for all periods presented. Volumes for acquired pipelines are included for all periods. |
(h) | Represents volumes for the Texas intrastate natural gas pipeline group. |
(i) | Includes 100% of gas gathering volumes for our wholly-owned assets. Joint venture throughput is reported at our ownership share. Volumes for acquired pipelines are included for all periods. |
Three months ended September 30, 2014 versus Three months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
TGP | $ | 29 | 16 | % | $ | 40 | 16 | % | |||||
Eagle Ford(a) | 11 | 39 | % | 37 | 25 | % | |||||||
Kinder Morgan Louisiana Pipeline | 9 | 58 | % | 9 | 50 | % | |||||||
EPNG | 7 | 7 | % | 15 | 11 | % | |||||||
KinderHawk field services | 4 | 10 | % | 5 | 11 | % | |||||||
EP midstream asset operations | 3 | 11 | % | 6 | 13 | % | |||||||
Texas Intrastate Natural Gas Pipeline Group | (4 | ) | (5 | )% | 104 | 11 | % | ||||||
Copano operations (excluding Eagle Ford) | (4 | ) | (5 | )% | 7 | 1 | % | ||||||
EagleHawk field services(b) | (3 | ) | (120 | )% | n/a | n/a | |||||||
Kinder Morgan treating operations | — | — | % | (2 | ) | (7 | )% | ||||||
All others (including eliminations) | 1 | 2 | % | (60 | ) | (67 | )% | ||||||
Total Natural Gas Pipelines | $ | 53 | 9 | % | $ | 161 | 8 | % |
Nine months ended September 30, 2014 versus Nine months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
Copano operations (excluding Eagle Ford) | $ | 107 | n/a | $ | 749 | n/a | |||||||
TGP | 105 | 18 | % | 123 | 16 | % | |||||||
EPNG | 65 | 28 | % | 122 | 40 | % | |||||||
Eagle Ford(a) | 41 | n/a | 273 | n/a | |||||||||
EP midstream asset operations | 20 | 37 | % | 56 | 57 | % | |||||||
Texas Intrastate Natural Gas Pipeline Group | 14 | 6 | % | 406 | 15 | % | |||||||
KinderHawk field services | 14 | 10 | % | 16 | 10 | % | |||||||
Kinder Morgan Louisiana Pipeline | 9 | 22 | % | 9 | 17 | % | |||||||
EagleHawk field services(b) | (15 | ) | (281 | )% | n/a | n/a | |||||||
Kinder Morgan treating operations | (7 | ) | (15 | )% | (26 | ) | (31 | )% | |||||
All others (including eliminations) | 2 | 1 | % | (227 | ) | (149 | )% | ||||||
Total Natural Gas Pipelines | $ | 355 | 21 | % | $ | 1,501 | 30 | % |
(a) | Equity investment until May 1, 2013. On that date, as part of our Copano acquisition, we acquired the remaining 50% ownership interest that we did not already own. Prior to that date, we recorded earnings under the equity method of accounting, but we received distributions in amounts essentially equal to equity earnings plus our share of depreciation and amortization expenses less our share of sustaining capital expenditures. |
(b) | Equity investment. |
▪ | increases of $29 million (16%) and $105 million (18%), respectively, from TGP primarily due to higher revenues from (i) firm transportation and storage, due largely to new projects placed in service in the latter part of 2013 and new southbound capacity contracts; (ii) usage and interruptible transportation services due to weather-related increases; and (iii) natural gas park and loan customer services due also primarily to colder winter weather relative to the nine months of 2013; |
▪ | increases of $11 million (39%) and $41 million, respectively, from our total (100%) Eagle Ford natural gas gathering operations. The increases were driven by higher natural gas gathering volumes from the Eagle Ford shale formation, and for the comparable nine month periods, to the incremental 50% ownership interest we acquired as part of our acquisition of Copano effective May 1, 2013. The overall increases in earnings were partially offset, however, by increased pipeline integrity costs; |
▪ | increases of $9 million (58%) and $9 million (22%), respectively, from our Kinder Morgan Louisiana Pipeline due to the early termination of a customer’s long-term natural gas transportation contract (an additional $198 million of earnings from that same contract termination is considered a certain item); |
▪ | increases of $7 million (7%) and $65 million (28%), respectively, from EPNG, due largely to higher transport revenues, and for the comparable nine month periods, to our acquisition of the remaining 50% interest we did not already own from KMI effective March 1, 2013; |
▪ | increases of $4 million (10%) and $14 million (10%), respectively, from our KinderHawk field services operations, due largely to increases in contractual volumes; |
▪ | increases of $3 million (11%) and $20 million (37%), respectively, from our EP midstream assets, due largely to higher gathering revenues from both the Altamont gathering system in Utah and the Camino Real gathering system in South Texas due to increased drilling activity, and for the comparable nine month periods, to our acquisition of the remaining 50% interest we did not already own from KMI effective March 1, 2013; |
▪ | a decrease of $4 million (5%) and an increase of $14 million (6%), respectively, from our Texas intrastate natural gas pipeline group (including the operations of our Kinder Morgan Tejas, Border, Kinder Morgan Texas, North Texas and Mier-Monterrey Mexico pipeline systems), due largely to higher maintenance costs in the third quarter of 2014, and for the comparable nine month periods, to higher natural gas sales, transportation and storage margins, all driven in part by colder weather in the first quarter of 2014; |
▪ | a decrease of $4 million (5%) and an increase of $107 million, respectively, from our Copano operations (but excluding Copano’s 50% ownership interest in Eagle Ford, which is included in the tables above with the 50% ownership interest we previously owned), due mainly to lower realized prices for the three months, and for the comparable nine month periods, to the 100% interest we acquired effective May 1, 2013; |
▪ | decreases of $3 million (120%) and $15 million (281%), respectively, from our EagleHawk field services operations, due largely to increased expenses pertaining to pipeline integrity costs; and |
▪ | for the comparable nine month periods, a $7 million (15%) decrease from our Kinder Morgan treating operations due largely to reduced activity at SouthTex Treaters (our treating equipment manufacturing facility). |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In millions, except operating statistics) | |||||||||||||||
Revenues(a) | $ | 508 | $ | 456 | $ | 1,445 | $ | 1,345 | |||||||
Operating expenses | (123 | ) | (121 | ) | (375 | ) | (320 | ) | |||||||
Earnings from equity investments | 5 | 6 | 19 | 19 | |||||||||||
Income tax expense | (2 | ) | (1 | ) | (6 | ) | (4 | ) | |||||||
EBDA | 388 | 340 | 1,083 | 1,040 | |||||||||||
Certain items(a) | (25 | ) | 9 | 6 | — | ||||||||||
EBDA before certain items | $ | 363 | $ | 349 | $ | 1,089 | $ | 1,040 | |||||||
Change from prior period | Increase/(Decrease) | ||||||||||||||
Revenues before certain items(a) | $ | 18 | 4 | % | $ | 106 | 8 | % | |||||||
EBDA before certain items | $ | 14 | 4 | % | $ | 49 | 5 | % | |||||||
Southwest Colorado CO2 production (gross) (Bcf/d)(b) | 1.2 | 1.2 | 1.3 | 1.2 | |||||||||||
Southwest Colorado CO2 production (net) (Bcf/d)(b) | 0.5 | 0.5 | 0.5 | 0.5 | |||||||||||
SACROC oil production (gross)(MBbl/d)(c) | 33.1 | 29.6 | 32.4 | 30.1 | |||||||||||
SACROC oil production (net)(MBbl/d)(d) | 27.6 | 24.6 | 26.9 | 25.1 | |||||||||||
Yates oil production (gross)(MBbl/d)(c) | 19.2 | 20.3 | 19.5 | 20.5 | |||||||||||
Yates oil production (net)(MBbl/d)(d) | 8.7 | 9.0 | 8.6 | 9.1 | |||||||||||
Katz oil production (gross)(MBbl/d)(c) | 3.4 | 2.7 | 3.6 | 2.4 | |||||||||||
Katz oil production (net)(MBbl/d)(d) | 2.8 | 2.2 | 3.0 | 2.0 | |||||||||||
Goldsmith oil production (gross)(MBbl/d)(c) | 1.2 | 1.3 | 1.2 | 0.6 | |||||||||||
Goldsmith oil production (net)(MBbl/d)(d) | 1.1 | 1.1 | 1.1 | 0.5 | |||||||||||
NGL sales volumes (net)(MBbl/d)(d) | 10.3 | 9.6 | 10.1 | 9.8 | |||||||||||
Realized weighted average oil price per Bbl(e) | $ | 87.59 | $ | 95.82 | $ | 89.40 | $ | 92.35 | |||||||
Realized weighted average NGL price per Bbl(f) | $ | 43.57 | $ | 46.72 | $ | 46.18 | $ | 45.81 |
(a) | Three and nine month 2014 amounts include unrealized gains of $25 million and unrealized losses of $6 million, respectively, and three month 2013 amount includes unrealized losses of $9 million, all relating to derivative contracts used to hedge forecasted crude oil sales. |
(b) | Includes McElmo Dome and Doe Canyon sales volumes. |
(c) | Represents 100% of the production from the field. We own an approximately 97% working interest in the SACROC unit, an approximately 50% working interest in the Yates unit, an approximately 99% working interest in the Katz Strawn unit and a 100% working interest in the Goldsmith Landreth unit. |
(d) | Net to us, after royalties and outside working interests. |
(e) | Includes all of our crude oil production properties. |
(f) | Includes production attributable to leasehold ownership and production attributable to our ownership in processing plants and third party processing agreements. |
Three months ended September 30, 2014 versus Three months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
Source and Transportation Activities | $ | 17 | 18 | % | $ | 16 | 15 | % | |||||
Oil and Gas Producing Activities | (3 | ) | (1 | )% | — | — | % | ||||||
Intrasegment eliminations | — | — | % | 2 | 8 | % | |||||||
Total CO2 | $ | 14 | 4 | % | $ | 18 | 4 | % |
Nine months ended September 30, 2014 versus Nine months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
Source and Transportation Activities | $ | 58 | 21 | % | $ | 65 | 21 | % | |||||
Oil and Gas Producing Activities | (9 | ) | (1 | )% | 49 | 4 | % | ||||||
Intrasegment eliminations | — | — | % | (8 | ) | (15 | )% | ||||||
Total CO2 | $ | 49 | 5 | % | $ | 106 | 8 | % |
▪ | EBDA increases of $17 million (18%) and $58 million (21%), respectively, driven primarily by higher revenues (described following), somewhat offset by higher labor costs, power costs and property taxes; and |
▪ | revenue increases of $16 million (15%) and $65 million (21%), respectively, driven primarily by increases of 14% and 15%, respectively, in average CO2 contract prices. The increases in contract prices were due primarily to two factors: (i) a change in the mix of contracts resulting in more CO2 being delivered under higher price contracts; and (ii) heavier weighting of new CO2 contract prices to the price of crude oil. CO2 volumes were also higher by 3% and 10%, respectively, when compared to the same two periods in 2013, primarily due to expansion projects at our Doe Canyon field which went in service in the fourth quarter of 2013. |
▪ | EBDA decreases of $3 million (1%) and $9 million (1%), respectively, driven by higher operating expenses as a result of (i) incremental well work over costs at our recently acquired Goldsmith Landreth unit; (ii) increased power costs; and (iii) higher property and severance tax expenses related to higher revenues (described following). Also contributing to lower EBDA for the comparable three and nine month periods was lower crude oil prices, which were offset by improved net production of 9% and 8%, respectively; and |
▪ | for the comparable nine month periods, a $49 million (4%) increase in revenues, driven primarily by an 8% increase in crude oil sales volumes. The increase in sales volumes was due primarily to higher production at the Katz field unit, incremental production from the Goldsmith Landreth unit (acquired effective June 1, 2013), and higher production at the SACROC unit (volumes presented in the results of operations table above). The increase in revenues from production was offset somewhat by a 3% decrease in our realized weighted average price per barrel of crude oil. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In millions, except operating statistics) | |||||||||||||||
Revenues | $ | 520 | $ | 474 | $ | 1,578 | $ | 1,371 | |||||||
Operating expenses(a) | (313 | ) | (281 | ) | (985 | ) | (1,001 | ) | |||||||
Other income (expense)(b) | 3 | (1 | ) | 5 | (6 | ) | |||||||||
Earnings from equity investments | 16 | 15 | 51 | 50 | |||||||||||
Interest income and Other, net | 1 | — | — | 2 | |||||||||||
Income tax expense | (5 | ) | (5 | ) | (16 | ) | (17 | ) | |||||||
EBDA | 222 | 202 | 633 | 399 | |||||||||||
Certain items, net(a)(b) | — | — | 2 | 182 | |||||||||||
EBDA before certain items | $ | 222 | $ | 202 | $ | 635 | $ | 581 | |||||||
Change from prior period | Increase/(Decrease) | ||||||||||||||
Revenues | $ | 46 | 10 | % | $ | 207 | 15 | % | |||||||
EBDA before certain items | $ | 20 | 10 | % | $ | 54 | 9 | % | |||||||
Gasoline (MMBbl)(c) | 118.0 | 109.2 | 333.8 | 312.6 | |||||||||||
Diesel fuel (MMBbl) | 39.0 | 36.9 | 113.5 | 106.5 | |||||||||||
Jet fuel (MMBbl) | 28.3 | 27.4 | 85.1 | 82.3 | |||||||||||
Total refined product volumes (MMBbl)(d) | 185.3 | 173.5 | 532.4 | 501.4 | |||||||||||
NGL (MMBbl)(e) | 8.5 | 8.9 | 23.5 | 26.7 | |||||||||||
Condensate (MMBbl)(f) | 9.8 | 4.4 | 22.2 | 9.0 | |||||||||||
Total delivery volumes (MMBbl) | 203.6 | 186.8 | 578.1 | 537.1 | |||||||||||
Ethanol (MMBbl)(g) | 10.8 | 10.2 | 30.9 | 28.6 |
(a) | Nine month 2014 amount includes a $4 million increase in expense associated with a certain Pacific operations litigation matter. Nine month 2013 amount includes a $162 million increase in operations and maintenance expense associated with certain rate case liability adjustments, and a $15 million increase in expense associated with a legal liability adjustment related to a certain West Coast terminal matter. |
(b) | Nine month 2014 amount includes a $2 million gain from the sale of propane pipeline line-fill. Nine month 2013 amount includes a $5 million loss from the write-off of assets at our Los Angeles Harbor West Coast terminal. |
(c) | Volumes include ethanol pipeline volumes. |
(d) | Includes Pacific, Plantation Pipe Line Company, Calnev, Central Florida and Parkway pipeline volumes. |
(e) | Includes Cochin and Cypress pipeline volumes. |
(f) | Includes Kinder Morgan Crude & Condensate and Double Eagle pipeline volumes. |
(g) | Represents total ethanol volumes, including ethanol pipeline volumes included in gasoline volumes above. |
Three months ended September 30, 2014 versus Three months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
Crude & Condensate Pipeline | $ | 21 | 279 | % | $ | 17 | 246 | % | |||||
Pacific operations | 5 | 6 | % | 2 | 2 | % | |||||||
Southeast terminal operations | 1 | 6 | % | 1 | 3 | % | |||||||
Cochin Pipeline | 1 | 5 | % | (2 | ) | (10 | )% | ||||||
Transmix operations | (7 | ) | (59 | )% | 30 | 14 | % | ||||||
All others (including eliminations) | (1 | ) | (2 | )% | (2 | ) | (3 | )% | |||||
Total Products Pipelines | $ | 20 | 10 | % | $ | 46 | 10 | % |
Nine months ended September 30, 2014 versus Nine months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
Crude & Condensate Pipeline | $ | 40 | 284 | % | $ | 59 | 355 | % | |||||
Pacific operations | 15 | 7 | % | 16 | 5 | % | |||||||
Southeast terminal operations | 6 | 11 | % | 7 | 8 | % | |||||||
Transmix operations | 5 | 17 | % | 137 | 21 | % | |||||||
Cochin Pipeline | (13 | ) | (19 | )% | (16 | ) | (20 | )% | |||||
All others (including eliminations) | 1 | — | % | 4 | 2 | % | |||||||
Total Products Pipelines | $ | 54 | 9 | % | $ | 207 | 15 | % |
▪ | increases of $21 million (279%) and $40 million (284%), respectively, from our Kinder Morgan Crude Oil & Condensate Pipeline, due mainly to increases of 120% and 145%, respectively, in pipeline throughput volumes; |
▪ | increases of $5 million (6%) and $15 million (7%), respectively, from our Pacific operations, due primarily to higher volumes and margins and higher physical inventory gains, and due partly to lower operating expenses; |
▪ | increases of $1 million (6%) and $6 million (11%), respectively, from our Southeast terminal operations, driven by higher butane blending revenues; |
▪ | an increase of $1 million (5%) and a decrease of $13 million (19%) from our Cochin Pipeline. For the comparable nine months, the decrease in earnings was primarily revenue related, driven by lower terminal, storage and petrochemical volumes, largely the result of the Cochin Reversal project, which converted the line to northbound condensate service to serve oilsands producers’ needs in western Canada; and |
▪ | a decrease of $7 million (59%) and an increase of $5 million (17%) from our transmix processing operations. The quarter-to-quarter decrease in earnings was due mainly to unfavorable inventory pricing relative to the third quarter of 2013, and for the comparable nine month periods, the higher earnings was driven by higher volumes and margins at various transmix sales plants. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In millions, except operating statistics) | |||||||||||||||
Revenues(a) | $ | 433 | $ | 354 | $ | 1,245 | $ | 1,035 | |||||||
Operating expenses(b) | (183 | ) | (162 | ) | (556 | ) | (488 | ) | |||||||
Other income (expense)(c) | 2 | 24 | — | 53 | |||||||||||
Earnings from equity investments | 5 | 5 | 16 | 17 | |||||||||||
Interest income and Other, net(d) | 1 | — | 6 | 2 | |||||||||||
Income tax expense(e) | (9 | ) | (4 | ) | (15 | ) | (9 | ) | |||||||
EBDA | 249 | 217 | 696 | 610 | |||||||||||
Certain items, net(a)(b)(c)(d)(e) | (2 | ) | (18 | ) | 6 | (33 | ) | ||||||||
EBDA before certain items | $ | 247 | $ | 199 | $ | 702 | $ | 577 | |||||||
Change from prior period | Increase/(Decrease) | ||||||||||||||
Revenues before certain items(a) | $ | 79 | 23 | % | $ | 202 | 20 | % | |||||||
EBDA before certain items | $ | 48 | 24 | % | $ | 125 | 22 | % | |||||||
Bulk transload tonnage (MMtons)(f) | 22.5 | 23.7 | 66.5 | 68.1 | |||||||||||
Ethanol (MMBbl) | 18.3 | 15.9 | 53.4 | 46.7 | |||||||||||
Liquids leaseable capacity (MMBbl) | 75.8 | 62.6 | 75.8 | 62.6 | |||||||||||
Liquids utilization %(g) | 94.3 | % | 95.4 | % | 94.3 | % | 95.4 | % |
(a) | Three and nine month 2014 amounts include increases in revenues of $4 million and $12 million, respectively, from amortization of deferred credits from our APT acquisition. The amortization is related to the valuation of certain customer contracts at fair value in purchase accounting. We are amortizing these deferred credits as noncash adjustments (increases) to revenue over the remaining contract periods. Three and nine month 2013 amounts include increases in revenues of $4 million related to 2012 hurricane expense reimbursements at our New York Harbor and Mid-Atlantic terminals. |
(b) | Three and nine month 2014 amounts include increases in expense of $2 million and $10 million, respectively, and three and nine month 2013 amounts include increases in expense of $7 million and $21 million, respectively, all related to hurricane clean-up and repair activities at our New York Harbor and Mid-Atlantic terminals. Nine month 2014 amount also includes a $12 million increase in expense primarily associated with a liability adjustment related to a certain litigation matter. Three and nine month 2013 amounts also include a combined $1 million increase in expense from other certain items. |
(c) | Nine month 2014 amount includes a $1 million casualty indemnification loss, and three and nine month 2013 amounts include casualty indemnification gains of $22 million and $50 million, respectively, all related to 2012 hurricane activity at our New York Harbor and Mid-Atlantic terminals. |
(d) | Nine month 2013 amount includes a $1 million casualty indemnification gain related to 2012 hurricane activity at our New York Harbor and Mid-Atlantic terminals. |
(e) | Nine month 2014 amount includes a $5 million decrease in expense (representing tax savings) related to the pre-tax expense amount associated with the litigation matter described in footnote (b). |
(f) | Volumes for acquired terminals are included for all periods and include our proportionate share of joint venture tonnage. |
(g) | The ratio of our actual leased capacity (excluding the capacity of tanks out of service) to our estimated potential capacity. |
Three months ended September 30, 2014 versus Three months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
Acquired assets and businesses | $ | 16 | n/a | $ | 26 | n/a | |||||||
West | 10 | 58 | % | 16 | 52 | % | |||||||
Gulf Central | 10 | 355 | % | 15 | 1,784 | % | |||||||
Gulf Liquids | 1 | 3 | % | 3 | 4 | % | |||||||
Gulf Bulk | 4 | 20 | % | 5 | 14 | % | |||||||
All others (including intrasegment eliminations and unallocated income tax expenses) | 7 | 7 | % | 14 | 7 | % | |||||||
Total Terminals | $ | 48 | 24 | % | $ | 79 | 23 | % |
Nine months ended September 30, 2014 versus Nine months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
Acquired assets and businesses | $ | 45 | n/a | $ | 76 | n/a | |||||||
West | 23 | 45 | % | 36 | 39 | % | |||||||
Gulf Central | 21 | 218 | % | 36 | 1,224 | % | |||||||
Gulf Liquids | 13 | 9 | % | 14 | 7 | % | |||||||
Gulf Bulk | 10 | 19 | % | 15 | 14 | % | |||||||
All others (including intrasegment eliminations and unallocated income tax expenses) | 13 | 4 | % | 25 | 4 | % | |||||||
Total Terminals | $ | 125 | 22 | % | $ | 202 | 20 | % |
▪ | increases $16 million and $45 million, respectively, from acquired assets and businesses, primarily the marine operations we acquired effective January 17, 2014 (our APT acquisition); |
▪ | increases of $10 million (58%) and $23 million (45%), respectively, from our West region terminals, driven by the completion of Edmonton expansion projects since the end of the third quarter of 2013; |
▪ | increases of $10 million (355%) and $21 million (218%), respectively, from our Gulf Central terminals, driven by higher earnings from our approximately 55%-owned Battleground Oil Specialty Terminal Company LLC oil terminal joint venture, which is located on the Houston Ship Channel and began operations in October 2013; |
▪ | increases of $1 million (3%) and $13 million (9%), respectively, from our Gulf Liquids terminals, due to higher liquids warehousing revenues from our Pasadena and Galena Park liquids facilities located along the Houston Ship Channel. The facilities benefited from high gasoline export demand, increased rail services and new and incremental customer agreements at higher rates, due in part to new tankage from completed expansion projects since the end of the third quarter of 2013; |
▪ | increases of $4 million (20%) and $10 million (19%), respectively, from our Gulf Bulk terminals, driven by higher petcoke period-to-period volumes in 2014, due in large part to refinery and coker shutdowns in 2013 as a result of turnarounds taken, and increased shortfall revenue recognized on take-or-pay contracts; and |
▪ | increases of $7 million (7%) and $13 million (4%), respectively, from the rest of the terminal operations was driven in part by improved steel pricing and good performance at our ethanol terminals. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In millions, except operating statistics) | |||||||||||||||
Revenues | $ | 73 | $ | 74 | $ | 210 | $ | 221 | |||||||
Operating expenses | (27 | ) | (27 | ) | (75 | ) | (79 | ) | |||||||
Earnings from equity investments | — | — | — | 4 | |||||||||||
Interest income and Other, net(a) | 8 | — | 14 | 241 | |||||||||||
Income tax expense(b) | (4 | ) | (4 | ) | (11 | ) | (101 | ) | |||||||
EBDA | 50 | 43 | 138 | 286 | |||||||||||
Certain items, net(a)(b) | — | 1 | — | (140 | ) | ||||||||||
EBDA before certain items | $ | 50 | $ | 44 | $ | 138 | $ | 146 | |||||||
Change from prior period | Increase/(Decrease) | ||||||||||||||
Revenues | $ | (1 | ) | (1 | )% | $ | (11 | ) | (5 | )% | |||||
EBDA before certain items | $ | 6 | 14 | % | $ | (8 | ) | (5 | )% | ||||||
Transport volumes (MMBbl)(c) | 27.6 | 24.0 | 79.5 | 77.6 |
(a) | Three and nine month 2013 amounts include a loss of $1 million and a gain of $224 million, respectively, from the sale of our equity and debt investments in the Express pipeline system. |
(b) | Nine month 2013 amount includes an $84 million increase in income tax expense related to the pre-tax gain amount associated with the sale of our equity and debt investments in the Express pipeline system described in footnote (a). |
(c) | Represents Trans Mountain pipeline system volumes. |
Three months ended September 30, 2014 versus Three months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
Express Pipeline(a) | $ | 9 | 371 | % | n/a | n/a | |||||||
Trans Mountain Pipeline | (3 | ) | (5 | )% | $ | (1 | ) | (1 | )% | ||||
Total Kinder Morgan Canada | $ | 6 | 14 | % | $ | (1 | ) | (1 | )% |
Nine months ended September 30, 2014 versus Nine months ended September 30, 2013 | |||||||||||||
EBDA increase/(decrease) | Revenues increase/(decrease) | ||||||||||||
(In millions, except percentages) | |||||||||||||
Express Pipeline(a) | $ | (2 | ) | (29 | )% | n/a | n/a | ||||||
Trans Mountain Pipeline | (6 | ) | (4 | )% | $ | (11 | ) | (5 | )% | ||||
Total Kinder Morgan Canada | $ | (8 | ) | (5 | )% | $ | (11 | ) | (5 | )% |
(a) | Amount consists of unrealized foreign currency gains/losses, net of tax, on outstanding, short-term intercompany borrowings. We exclude these unrealized gains/losses on intercompany borrowings from our DCF calculation. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In millions) | |||||||||||||||
General and administrative expenses(a) | $ | 126 | $ | 136 | $ | 411 | $ | 433 | |||||||
Interest expense, net of unallocable interest income(b) | $ | 238 | $ | 220 | $ | 708 | $ | 637 | |||||||
Unallocable income tax expense | $ | 2 | $ | 4 | $ | 8 | $ | 10 | |||||||
Net income attributable to noncontrolling interests(c) | $ | 13 | $ | 8 | $ | 29 | $ | 27 |
(a) | Three and nine month 2014 amounts, and three and nine month 2013 amounts, include a $1 million decrease in expense, a $6 million increase in expense, a $2 million increase in expense and a $7 million increase in expense, respectively, all related to severance expense allocated to us from KMI (associated with both our March 2013 drop-down asset group and assets we acquired from KMI in August 2012). Nine month 2014 amount also includes a $1 million decrease in expense associated with a certain Pacific operations litigation matter. Three and nine month 2013 amounts also include increases in expense of $1 million and $33 million, respectively, associated with unallocated legal expenses and certain asset and business acquisition costs. Nine month 2013 amount also includes a $9 million increase in expense attributable to our March 2013 drop-down asset group for periods prior to our March 1, 2013 acquisition date. |
(b) | Three and nine month 2014 amounts include increases in interest expense of $1 million and $14 million, respectively, associated with a certain Pacific operations litigation matter. Three and nine month 2014 amounts, and three and nine month 2013 amounts also include decreases in interest expense of $1 million, $5 million, $1 million and $3 million, respectively, all associated with debt fair value adjustments recorded in purchase accounting for our Copano acquisition. Nine month 2013 amount also includes incremental interest expense of $15 million attributable to our March 2013 drop-down asset group for periods prior to our March 1, 2013 acquisition date. |
(c) | Three and nine month 2014 amounts and nine month 2013 amount include increases of $2 million, $1 million and $5 million, respectively, in net income attributable to our noncontrolling interests, related to the combined effect from all of the three and nine month 2014 and 2013 certain items previously disclosed in the footnotes to the tables included above in “—Results of Operations.” |
▪ | cash distributions and sustaining capital expenditures with existing cash and cash flows from operating activities; |
▪ | expansion capital expenditures and working capital deficits with retained cash (which may result from including i-units in the determination of cash distributions per unit but paying quarterly distributions on i-units in additional i-units rather than cash), proceeds from divestitures, additional borrowings (including commercial paper issuances), and the issuance of additional common units or the proceeds from purchases of additional i-units by KMR; |
▪ | interest payments with cash flows from operating activities; and |
▪ | debt principal payments with proceeds from divestitures, additional borrowings or by the issuance of additional common units or the proceeds from purchases of additional i-units by KMR. |
Nine Months Ended September 30, 2014 | 2014 Remaining | Total | |||||||||
(In millions) | |||||||||||
Sustaining(a) | $ | 292 | $ | 125 | $ | 417 | |||||
Discretionary(b)(c) | 2,646 | 1,206 | 3,852 | ||||||||
Total | $ | 2,938 | $ | 1,331 | $ | 4,269 |
(a) | Nine month 2014 amount, 2014 remaining amount, and total 2014 amount include $3 million, $2 million and $5 million, respectively, for our proportionate share of sustaining capital expenditures of our unconsolidated joint ventures. |
(b) | Nine month 2014 amount (i) includes $449 million of discretionary capital expenditures of our unconsolidated joint ventures and acquisitions; and (ii) excludes a combined $117 million net change from accrued capital expenditures, contractor retainage and amounts primarily related to contributions from our noncontrolling interests to fund a portion of certain capital projects. |
(c) | 2014 remaining amount includes our contributions to certain unconsolidated joint ventures and small acquisitions, net of contributions estimated from unaffiliated joint venture partners for consolidated investments. |
▪ | a $793 million increase in cash from overall higher partnership income—after adjusting our period-to-period $100 million decrease in net income (discussed above in “—Results of Operations”) for the following five non-cash items: (i) a $558 million increase from the 2013 gain on the remeasurement of our previous 50% equity investment in Eagle Ford to its fair value; (ii) a $224 million increase from the 2013 gain on the sale of our investments in Express (see the discussion of these investments in Note 2 “Acquisitions and Divestitures” to our consolidated financial statements); (iii) a $176 million increase due to higher DD&A expenses (including amortization of excess cost of equity investments); (iv) a $75 million increase from higher gains from the sale or casualty of property, plant and equipment (as disclosed above in “—Results of Operations,” the first nine months of 2013 included both a $50 million casualty indemnification gain related to 2012 hurricane activity at our New York Harbor and Mid-Atlantic terminal facilities and a $36 million gain from the sale of certain Gulf Coast offshore and onshore TGP supply facilities); and (v) a $140 million decrease from expenses associated with adjustments to accrued legal liabilities, primarily related to incremental adjustments recorded in the first nine months of 2013 related to both our West Coast |
▪ | a $53 million increase in cash due to favorable changes in the collection and payment of trade and related party receivables and payables, due primarily to the timing of payments received from customers and made to vendors; |
▪ | a $30 million increase in cash from the combined net activity of our equity method investees and the net changes in all other operating assets and liabilities. The increase was driven by, among other things, higher period-to-period cash inflows from favorable changes in previously deferred reimbursable costs and expenses, and short-term product inventories from our transmix and crude oil and condensate pipeline operations (driven by higher crude oil inventory sales volumes). The overall increase in cash from operating net assets was partly offset by lower cash flows from both natural gas storage and pipeline transportation system balancing and accrued tax liabilities; and |
▪ | a $96 million decrease in cash from interest rate swap termination payments. In the first nine months of 2013, in separate transactions, we terminated three existing fixed-to-variable interest rate swap agreements prior to their contractual maturity dates. |
▪ | an $808 million decrease in cash due to higher expenditures for the acquisition of assets and investments from unrelated parties. The overall increase was primarily related to the $961 million we paid in the first nine months of 2014 for our APT acquisition, versus the $280 million we paid in the first nine months of 2013 to acquire the Goldsmith Landreth San Andres oil field unit. For more information about our asset acquisitions during the first nine months of 2014 and 2013, see Note 2 “Acquisitions and Divestitures—Acquisitions” to our consolidated financial statements; |
▪ | a $443 million decrease in cash due to higher capital expenditures in the first nine months of 2014, as described above in “—Capital Expenditures;” |
▪ | a $402 million decrease in cash due to the net proceeds we received in the first nine months of 2013 from the sale of our investments in the Express pipeline system; |
▪ | a $156 million decrease in cash due to higher capital contributions, primarily due to a $175 million contribution we made in the third quarter of 2014 to our 50%-owned Midcontinent Express Pipeline LLC to fund our share of its repayment of $350 million in senior notes that matured September 15, 2014; and |
▪ | a $994 million increase in cash due to the payments we made to KMI in the first nine months of 2013 to acquire our March 2013 drop-down asset group. |
▪ | a $425 million decrease in cash due to higher partnership distributions. Distributions to all partners, consisting of our common and Class B unitholders, our general partner and our noncontrolling interests, totaled $2,757 million in the first nine months of 2014, compared to $2,332 million in the first nine months of 2013. The increase in distributions was due to increases in the per unit cash distribution paid, the number of outstanding units, and the resulting increase in our general partner incentive distributions. Further information regarding our distributions is discussed following in “—Partnership Distributions;” |
▪ | a $107 million decrease in cash due to lower contributions from our general partner, KMI and our non-controlling interests, chiefly due to incremental contributions we received in the first nine months of 2013 from (i) our general partner for its 1% general partner capital interest in our Copano acquisition; (ii) KMI for net contributions to our March 2013 drop-down asset group; and (iii) our BOSTCO partners for their proportionate share of the joint venture’s oil terminal construction costs; |
▪ | a $47 million decrease in cash due to lower partnership equity issuances. This decrease reflects the combined $1,178 million we received, after commissions and underwriting expenses, from issuing additional common and i-units during the first nine months of 2014 (discussed in Note 4 “Partners’ Capital—Equity Issuances” to our consolidated financial statements), versus the $1,225 million we received from the sales of additional common units and i-units in the first nine months of 2013; and |
▪ | a $503 million increase in cash from overall debt financing activities, including our issuances and payments of debt and our debt issuance costs. This overall increase in cash from debt activities was primarily due to (i) a $404 million increase due to the immediate repayment of all of the outstanding borrowings under Copano’s bank credit facility that we assumed on the May 1, 2013 acquisition date; (ii) a $259 million increase from the June 1, 2013 redemption and retirement of Copano’s 7.75% senior notes; (iii) a $191 million increase from the September 4, 2013 redemption and retirement of a $178 million aggregate principal amount of Copano’s outstanding 7.125% senior notes (the redemption payment included a premium of $13 million); (iv) a $78 million increase related to the net repayment of all of the outstanding borrowings under the EP midstream assets’ bank credit facility that we assumed on the March 1, 2013 acquisition date; (v) a $397 million decrease due to higher short-term net payments made under our commercial paper program in the first nine months of 2014; and (vi) a combined $43 million decrease due to higher net issuances of our senior notes in the first nine months of 2013 (as discussed in Note 3 “Debt—Changes in Debt” to our consolidated financial statements, we generated net proceeds of $2,672 million from the issuance of senior notes in the first nine months of 2014, and in the same period of 2013, we generated net proceeds of $2,715 million from completing two separate public offerings of our senior notes). |
• | the parties may be liable for damages to one another under the terms and conditions of the KMP Merger agreement; |
• | negative reactions from the financial markets, including declines in the price of KMP common units due to the fact that the current price may reflect a market assumption that the KMP Merger will be completed; |
• | having to pay certain significant costs relating to the KMP Merger, including, in certain circumstances, a termination fee of $817 million; and |
• | the attention of management of KMP will have been diverted to the KMP Merger rather than its own operations and pursuit of other opportunities that could have been beneficial to KMP. |
*2.1 | Agreement and Plan of Merger, dated as of August 9, 2014, by and among Kinder Morgan Energy Partners, L.P., Kinder Morgan G.P., Inc., Kinder Morgan Management, LLC, Kinder Morgan, Inc. and P Merger Sub LLC (schedules omitted pursuant to Item 601(b)(2) of Regulation S-K) (filed as Exhibit 2.1 to Kinder Morgan Energy Partners, L.P.’s Current Report on Form 8-K (File No. 1-11234), filed August 12, 2014). | ||
4.1 | Certificate of the Vice President, Finance and Investor Relations and the Vice President and Secretary of Kinder Morgan Management, LLC and Kinder Morgan G.P., Inc., on behalf of Kinder Morgan Energy Partners, L.P., establishing the terms of the 4.25% Senior Notes due 2024 and the 5.40% Senior Notes due 2044. | ||
4.2 | Certain instruments with respect to long-term debt of Kinder Morgan Energy Partners, L.P. and its consolidated subsidiaries which relate to debt that does not exceed 10% of the total assets of Kinder Morgan Energy Partners, L.P. and its consolidated subsidiaries are omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K (17 CFR 229.601). Kinder Morgan Energy Partners, L.P. hereby agrees to furnish supplementally to the Securities and Exchange Commission a copy of each such instrument upon request. | ||
*10.1 | Support Agreement, dated as of August 9, 2014, by and among Kinder Morgan Energy Partners, L.P., Kinder Morgan G.P., Inc., Kinder Morgan Management, LLC, El Paso Pipeline Partners, L.P., El Paso Pipeline GP Company, L.L.C., Richard D. Kinder and RDK Investments, Ltd. (filed as Exhibit 10.1 to Kinder Morgan Energy Partners, L.P.’s Current Report on Form 8-K (File No. 1-11234), filed August 12, 2014). | ||
12.1 | Statement re: computation of ratio of earnings to fixed charges. | ||
31.1 | Certification by Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification by Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2 | Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
95.1 | Mine Safety Disclosures. | ||
101 | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) our Consolidated Statements of Income for the three and nine months ended September 30, 2014 and 2013; (ii) our Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2014 and 2013; (iii) our Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013; (iv) our Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013; (v) our Consolidated Statements of Partners’ Capital for the nine months ended September 30, 2014 and 2013; and (vi) the notes to our Consolidated Financial Statements. |
KINDER MORGAN ENERGY PARTNERS, L.P. | ||||
Registrant | ||||
By: | KINDER MORGAN G.P., INC., | |||
its general partner | ||||
By: | KINDER MORGAN MANAGEMENT, LLC, | |||
its delegate | ||||
Date: October 27, 2014 | By: | /s/ Kimberly A. Dang | ||
Kimberly A. Dang | ||||
Vice President and Chief Financial Officer | ||||
(principal financial and accounting officer) |
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