UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20212022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission file number: 001-35081
KINDER MORGAN, INC.
(Exact name of registrant as specified in its charter)
| | | | | |
Delaware | 80-0682103 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1001 Louisiana Street, Suite 1000, Houston, Texas 77002
(Address of principal executive offices)(zip code)
Registrant’s telephone number, including area code: 713-369-9000
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class P Common Stock | KMI | New York Stock Exchange |
1.500% Senior Notes due 2022 | KMI 22 | New York Stock Exchange |
2.250% Senior Notes due 2027 | KMI 27 A | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
As of OctoberJuly 21, 2021,2022, the registrant had 2,267,425,5072,253,000,833 shares of Class P sharescommon stock outstanding.
KINDER MORGAN, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
KINDER MORGAN, INC. AND SUBSIDIARIES
GLOSSARY
Company Abbreviations
| | | | | | | | | | | | | | | | | |
EPNG | = | El Paso Natural Gas Company, L.L.C. | Ruby | = | Ruby Pipeline Holding Company, L.L.C. |
KMBT | = | Kinder Morgan Bulk Terminals, Inc. | SFPP | = | SFPP, L.P. |
KMI | = | Kinder Morgan, Inc. and its majority-owned and/or controlled subsidiaries | SNG | = | Southern Natural Gas Company, L.L.C. |
TGP | = | Tennessee Gas Pipeline Company, L.L.C. |
KMLT | = | Kinder Morgan Liquid Terminals, LLC | | | |
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Unless the context otherwise requires, references to “we,” “us,” “our,” or “the Company” are intended to mean Kinder Morgan, Inc. and its majority-owned and/or controlled subsidiaries. |
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Common Industry and Other Terms |
/d | = | per day | EPAFERC | = | U.S. Environmental Protection AgencyFederal Energy Regulatory Commission |
Bbl | = | barrelbarrels | FASBGAAP | = | FinancialU.S. Generally Accepted Accounting Standards BoardPrinciples |
BBtu | = | billion British Thermal Units | FERCLLC | = | Federal Energy Regulatory Commissionlimited liability company |
Bcf | = | billion cubic feet | GAAPLIBOR | = | U.S. Generally Accepted Accounting PrinciplesLondon Interbank Offered Rate |
CERCLA | = | Comprehensive Environmental Response, Compensation and Liability Act | LLCMBbl | = | limited liability companythousand barrels |
LIBORMMBbl | = | London Interbank Offered Ratemillion barrels |
CO2 | = | carbon dioxide or our CO2 business segment | MBbl | = | thousand barrels |
COVID-19 | = | Coronavirus Disease 2019, a widespread contagious disease, or the related pandemic declared and resulting worldwide economic downturn | MMBbl | = | million barrels |
MMtons | = | million tons |
DCF | = | distributable cash flow | NGL | = | natural gas liquids |
DD&A | = | depreciation, depletion and amortization | NYMEX | = | New York Mercantile Exchange |
EBDA | = | earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments | OTC | = | over-the-counter |
ROUPHMSA | = | Right-of-UsePipeline and Hazardous Materials Safety Administration |
EBITDA | = | earnings before interest, income taxes, depreciation, depletion and amortization expenses, and amortization of excess cost of equity investments | ROU | = | Right-of-Use |
U.S. | = | United States of America |
EPA | = | U.S. Environmental Protection Agency | WTI | = | West Texas Intermediate |
FASB | = | Financial Accounting Standards Board | | | |
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Information Regarding Forward-Looking Statements
This report includes forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. They use words such as “anticipate,” “believe,” “intend,” “plan,” “projection,” “forecast,” “strategy,” “outlook,” “continue,” “estimate,” “expect,” “may,” “will,” “shall,” or the negative of those terms or other variations of them or comparable terminology. In particular, expressed or implied statements concerning future actions, conditions or events, future operating results or the ability to generate sales, income or cash flow, service debt or pay dividends, are forward-looking statements. Forward-looking statements in this report include, among others, express or implied statements pertaining to: the long-term demand for our assets and services, our anticipated dividends our proposed acquisition of Kinetrex Energy and our capital projects, including expected completion timing and benefits of the acquisition and those projects.
Important factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements in this report include: the impacts of the COVID-19 pandemic and the pace and extent of economic recovery; the timing and extent of changes in the supply of and demand for the products we transport and handle; commodity prices; and the other risks and uncertainties described in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part I, Item 3. “Quantitative and Qualitative Disclosures About Market Risk” in this report, as well as “Information Regarding Forward-Looking Statements” and Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20202021 (except to the extent such information is modified or superseded by information in subsequent reports).
You should keep these risk factors in mind when considering forward-looking statements. These risk factors could cause our actual results to differ materially from those contained in any forward-looking statement. Because of these risks and uncertainties, you should not place undue reliance on any forward-looking statement. We disclaim any obligation, other than as required by applicable law, to publicly update or revise any of our forward-looking statements to reflect future events or developments.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts, unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Revenues | Revenues | | | Revenues | | |
Services | Services | $ | 1,928 | | | $ | 1,881 | | | $ | 5,734 | | | $ | 5,664 | | Services | $ | 2,011 | | | $ | 1,889 | | | $ | 4,061 | | | $ | 3,806 | |
Commodity sales | Commodity sales | 1,868 | | | 982 | | | 6,343 | | | 2,772 | | Commodity sales | 3,100 | | | 1,246 | | | 5,308 | | | 4,475 | |
Other | Other | 28 | | | 56 | | | 108 | | | 149 | | Other | 40 | | | 15 | | | 75 | | | 80 | |
Total Revenues | Total Revenues | 3,824 | | | 2,919 | | | 12,185 | | | 8,585 | | Total Revenues | 5,151 | | | 3,150 | | | 9,444 | | | 8,361 | |
| Operating Costs, Expenses and Other | Operating Costs, Expenses and Other | | | Operating Costs, Expenses and Other | | |
Costs of sales | Costs of sales | 1,559 | | | 655 | | | 4,504 | | | 1,759 | | Costs of sales | 2,683 | | | 936 | | | 4,577 | | | 2,945 | |
Operations and maintenance | Operations and maintenance | 614 | | | 643 | | | 1,710 | | | 1,869 | | Operations and maintenance | 663 | | | 582 | | | 1,248 | | | 1,096 | |
Depreciation, depletion and amortization | Depreciation, depletion and amortization | 526 | | | 539 | | | 1,595 | | | 1,636 | | Depreciation, depletion and amortization | 543 | | | 528 | | | 1,081 | | | 1,069 | |
General and administrative | General and administrative | 174 | | | 153 | | | 490 | | | 461 | | General and administrative | 152 | | | 160 | | | 308 | | | 316 | |
Taxes, other than income taxes | Taxes, other than income taxes | 106 | | | 100 | | | 324 | | | 295 | | Taxes, other than income taxes | 116 | | | 108 | | | 227 | | | 218 | |
| Loss on impairments and divestitures, net (Note 3) | 4 | | | 11 | | | 1,602 | | | 1,987 | | |
(Gain) loss on divestitures and impairments, net | | (Gain) loss on divestitures and impairments, net | (11) | | | 1,602 | | | (21) | | | 1,598 | |
Other income, net | Other income, net | (3) | | | (1) | | | (6) | | | (2) | | Other income, net | (1) | | | (2) | | | (6) | | | (3) | |
Total Operating Costs, Expenses and Other | Total Operating Costs, Expenses and Other | 2,980 | | | 2,100 | | | 10,219 | | | 8,005 | | Total Operating Costs, Expenses and Other | 4,145 | | | 3,914 | | | 7,414 | | | 7,239 | |
| Operating Income | 844 | | | 819 | | | 1,966 | | | 580 | | |
Operating Income (Loss) | | Operating Income (Loss) | 1,006 | | | (764) | | | 2,030 | | | 1,122 | |
| Other Income (Expense) | Other Income (Expense) | | | Other Income (Expense) | | |
Earnings from equity investments | Earnings from equity investments | 169 | | | 194 | | | 392 | | | 562 | | Earnings from equity investments | 182 | | | 157 | | | 369 | | | 223 | |
| Amortization of excess cost of equity investments | Amortization of excess cost of equity investments | (21) | | | (32) | | | (56) | | | (99) | | Amortization of excess cost of equity investments | (19) | | | (13) | | | (38) | | | (35) | |
Interest, net | Interest, net | (368) | | | (383) | | | (1,122) | | | (1,214) | | Interest, net | (355) | | | (377) | | | (688) | | | (754) | |
Other, net (Note 3) | 21 | | | 14 | | | 264 | | | 32 | | |
Other, net (Note 2) | | Other, net (Note 2) | 23 | | | 20 | | | 42 | | | 243 | |
Total Other Expense | Total Other Expense | (199) | | | (207) | | | (522) | | | (719) | | Total Other Expense | (169) | | | (213) | | | (315) | | | (323) | |
| Income (Loss) Before Income Taxes | Income (Loss) Before Income Taxes | 645 | | | 612 | | | 1,444 | | | (139) | | Income (Loss) Before Income Taxes | 837 | | | (977) | | | 1,715 | | | 799 | |
| Income Tax Expense | (134) | | | (140) | | | (248) | | | (304) | | |
Income Tax (Expense) Benefit | | Income Tax (Expense) Benefit | (184) | | | 237 | | | (378) | | | (114) | |
| Net Income (Loss) | Net Income (Loss) | 511 | | | 472 | | | 1,196 | | | (443) | | Net Income (Loss) | 653 | | | (740) | | | 1,337 | | | 685 | |
| Net Income Attributable to Noncontrolling Interests | Net Income Attributable to Noncontrolling Interests | (16) | | | (17) | | | (49) | | | (45) | | Net Income Attributable to Noncontrolling Interests | (18) | | | (17) | | | (35) | | | (33) | |
| Net Income (Loss) Attributable to Kinder Morgan, Inc. | Net Income (Loss) Attributable to Kinder Morgan, Inc. | $ | 495 | | | $ | 455 | | | $ | 1,147 | | | $ | (488) | | Net Income (Loss) Attributable to Kinder Morgan, Inc. | $ | 635 | | | $ | (757) | | | $ | 1,302 | | | $ | 652 | |
| | Class P Shares | | |
Class P Common Stock | | Class P Common Stock | |
Basic and Diluted Earnings (Loss) Per Share | Basic and Diluted Earnings (Loss) Per Share | $ | 0.22 | | | $ | 0.20 | | | $ | 0.50 | | | $ | (0.22) | | Basic and Diluted Earnings (Loss) Per Share | $ | 0.28 | | | $ | (0.34) | | | $ | 0.57 | | | $ | 0.29 | |
| Basic and Diluted Weighted Average Shares Outstanding | Basic and Diluted Weighted Average Shares Outstanding | 2,267 | | | 2,263 | | | 2,265 | | | 2,263 | | Basic and Diluted Weighted Average Shares Outstanding | 2,265 | | | 2,265 | | | 2,266 | | | 2,264 | |
|
The accompanying notes are an integral part of these consolidated financial statements.
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net income (loss) | $ | 511 | | | $ | 472 | | | $ | 1,196 | | | $ | (443) | |
Other comprehensive (loss) income, net of tax | | | | | | | |
Change in fair value of hedge derivatives (net of tax benefit of $41, $17, $135 and $5, respectively) | (131) | | | (56) | | | (444) | | | (16) | |
Reclassification of change in fair value of derivatives to net income (loss) (net of tax (benefit) expense of $(28), $1, $(55) and $(22), respectively) | 92 | | | (5) | | | 181 | | | 72 | |
Foreign currency translation adjustments (net of tax expense of $—, $—, $— and $—, respectively) | — | | | — | | | — | | | 1 | |
Benefit plan adjustments (net of tax expense of $2, $2, $7 and $7, respectively) | 6 | | | 5 | | | 28 | | | 21 | |
Total other comprehensive (loss) income | (33) | | | (56) | | | (235) | | | 78 | |
| | | | | | | |
Comprehensive income (loss) | 478 | | | 416 | | | 961 | | | (365) | |
Comprehensive income attributable to noncontrolling interests | (16) | | | (17) | | | (49) | | | (45) | |
Comprehensive income (loss) attributable to Kinder Morgan, Inc. | $ | 462 | | | $ | 399 | | | $ | 912 | | | $ | (410) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net income (loss) | $ | 653 | | | $ | (740) | | | $ | 1,337 | | | $ | 685 | |
Other comprehensive income (loss), net of tax | | | | | | | |
Net unrealized loss from derivative instruments (net of taxes of $24, $47, $149 and $94, respectively) | (78) | | | (157) | | | (489) | | | (313) | |
Reclassification into earnings of net derivative instruments loss to net income (net of taxes of $(48), $(9), $(89), and $(27), respectively) | 157 | | | 30 | | | 292 | | | 89 | |
| | | | | | | |
Benefit plan adjustments (net of taxes of $(1), $(1), $(5) and $(5), respectively) | 3 | | | 5 | | | 16 | | | 22 | |
Total other comprehensive income (loss) | 82 | | | (122) | | | (181) | | | (202) | |
| | | | | | | |
Comprehensive income (loss) | 735 | | | (862) | | | 1,156 | | | 483 | |
Comprehensive income attributable to noncontrolling interests | (18) | | | (17) | | | (35) | | | (33) | |
Comprehensive income (loss) attributable to KMI | $ | 717 | | | $ | (879) | | | $ | 1,121 | | | $ | 450 | |
The accompanying notes are an integral part of these consolidated financial statements.
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share amounts, unaudited)
| | | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
ASSETS | ASSETS | | | ASSETS | |
Current Assets | Current Assets | | | Current Assets | |
Cash and cash equivalents | Cash and cash equivalents | $ | 102 | | | $ | 1,184 | | Cash and cash equivalents | $ | 100 | | | $ | 1,140 | |
Restricted deposits | Restricted deposits | 177 | | | 25 | | Restricted deposits | 317 | | | 7 | |
Accounts receivable | Accounts receivable | 1,433 | | | 1,293 | | Accounts receivable | 2,063 | | | 1,611 | |
Fair value of derivative contracts | Fair value of derivative contracts | 199 | | | 185 | | Fair value of derivative contracts | 141 | | | 220 | |
Inventories | Inventories | 457 | | | 348 | | Inventories | 690 | | | 562 | |
| Other current assets | Other current assets | 318 | | | 168 | | Other current assets | 297 | | | 289 | |
Total current assets | Total current assets | 2,686 | | | 3,203 | | Total current assets | 3,608 | | | 3,829 | |
| Property, plant and equipment, net | Property, plant and equipment, net | 35,576 | | | 35,836 | | Property, plant and equipment, net | 35,530 | | | 35,653 | |
Investments | Investments | 7,620 | | | 7,917 | | Investments | 7,470 | | | 7,578 | |
Goodwill | Goodwill | 20,033 | | | 19,851 | | Goodwill | 19,914 | | | 19,914 | |
Other intangibles, net | Other intangibles, net | 1,744 | | | 2,453 | | Other intangibles, net | 1,557 | | | 1,678 | |
Deferred income taxes | Deferred income taxes | 303 | | | 536 | | Deferred income taxes | — | | | 115 | |
| Deferred charges and other assets | Deferred charges and other assets | 1,678 | | | 2,177 | | Deferred charges and other assets | 1,311 | | | 1,649 | |
Total Assets | Total Assets | $ | 69,640 | | | $ | 71,973 | | Total Assets | $ | 69,390 | | | $ | 70,416 | |
| LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | LIABILITIES AND STOCKHOLDERS’ EQUITY | |
Current Liabilities | Current Liabilities | | | | Current Liabilities | |
Current portion of debt | Current portion of debt | $ | 2,822 | | | $ | 2,558 | | Current portion of debt | $ | 2,970 | | | $ | 2,646 | |
Accounts payable | Accounts payable | 1,189 | | | 837 | | Accounts payable | 1,691 | | | 1,259 | |
| Accrued interest | Accrued interest | 332 | | | 525 | | Accrued interest | 442 | | | 504 | |
Accrued taxes | Accrued taxes | 284 | | | 267 | | Accrued taxes | 217 | | | 270 | |
Accrued contingencies | 246 | | | 307 | | |
Fair value of derivative contracts | | Fair value of derivative contracts | 521 | | | 178 | |
| Other current liabilities | Other current liabilities | 952 | | | 580 | | Other current liabilities | 1,051 | | | 964 | |
Total current liabilities | Total current liabilities | 5,825 | | | 5,074 | | Total current liabilities | 6,892 | | | 5,821 | |
| Long-term liabilities and deferred credits | Long-term liabilities and deferred credits | | | | Long-term liabilities and deferred credits | |
Long-term debt | Long-term debt | | | | Long-term debt | |
Outstanding | Outstanding | 28,988 | | | 30,838 | | Outstanding | 28,140 | | | 29,772 | |
| Debt fair value adjustments | Debt fair value adjustments | 1,014 | | | 1,293 | | Debt fair value adjustments | 412 | | | 902 | |
Total long-term debt | Total long-term debt | 30,002 | | | 32,131 | | Total long-term debt | 28,552 | | | 30,674 | |
| Deferred income taxes | | Deferred income taxes | 196 | | | — | |
| Other long-term liabilities and deferred credits | Other long-term liabilities and deferred credits | 2,160 | | | 2,202 | | Other long-term liabilities and deferred credits | 2,125 | | | 2,000 | |
| Total long-term liabilities and deferred credits | Total long-term liabilities and deferred credits | 32,162 | | | 34,333 | | Total long-term liabilities and deferred credits | 30,873 | | | 32,674 | |
Total Liabilities | Total Liabilities | 37,987 | | | 39,407 | | Total Liabilities | 37,765 | | | 38,495 | |
| Commitments and contingencies (Notes 4 and 10) | 0 | | 0 | |
Redeemable Noncontrolling Interest | 661 | | | 728 | | |
Commitments and contingencies (Notes 3 and 9) | | Commitments and contingencies (Notes 3 and 9) | 0 | | 0 |
Stockholders’ Equity | Stockholders’ Equity | | | | Stockholders’ Equity | |
| Class P shares, $0.01 par value, 4,000,000,000 shares authorized, 2,267,381,482 and 2,264,257,336 shares, respectively, issued and outstanding | 23 | | | 23 | | |
Class P Common Stock, $0.01 par value, 4,000,000,000 shares authorized, 2,257,464,962 and 2,267,391,527 shares, respectively, issued and outstanding | | Class P Common Stock, $0.01 par value, 4,000,000,000 shares authorized, 2,257,464,962 and 2,267,391,527 shares, respectively, issued and outstanding | 23 | | | 23 | |
Additional paid-in capital | Additional paid-in capital | 41,788 | | | 41,756 | | Additional paid-in capital | 41,654 | | | 41,806 | |
Accumulated deficit | Accumulated deficit | (10,617) | | | (9,936) | | Accumulated deficit | (10,540) | | | (10,595) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (642) | | | (407) | | Accumulated other comprehensive loss | (592) | | | (411) | |
Total Kinder Morgan, Inc.’s stockholders’ equity | Total Kinder Morgan, Inc.’s stockholders’ equity | 30,552 | | | 31,436 | | Total Kinder Morgan, Inc.’s stockholders’ equity | 30,545 | | | 30,823 | |
Noncontrolling interests | Noncontrolling interests | 440 | | | 402 | | Noncontrolling interests | 1,080 | | | 1,098 | |
Total Stockholders’ Equity | Total Stockholders’ Equity | 30,992 | | | 31,838 | | Total Stockholders’ Equity | 31,625 | | | 31,921 | |
Total Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity | $ | 69,640 | | | $ | 71,973 | | |
Total Liabilities and Stockholders’ Equity | | Total Liabilities and Stockholders’ Equity | $ | 69,390 | | | $ | 70,416 | |
The accompanying notes are an integral part of these consolidated financial statements.
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KINDER MORGAN, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In millions, unaudited) |
|
| Nine Months Ended September 30, |
| 2021 | | 2020 |
Cash Flows From Operating Activities | | | |
Net income (loss) | $ | 1,196 | | | $ | (443) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities | | | |
Depreciation, depletion and amortization | 1,595 | | | 1,636 | |
Deferred income taxes | 236 | | | 164 | |
Amortization of excess cost of equity investments | 56 | | | 99 | |
| | | |
| | | |
Loss on impairments and divestitures, net (Note 3) | 1,602 | | | 1,987 | |
Gain on sale of interest in equity investment (Note 3) | (206) | | | — | |
Earnings from equity investments | (392) | | | (562) | |
Distributions from equity investment earnings | 535 | | | 487 | |
Changes in components of working capital | | | |
Accounts receivable | (119) | | | 238 | |
Inventories | (89) | | | 41 | |
Other current assets | (90) | | | 14 | |
Accounts payable | 362 | | | (107) | |
Accrued interest, net of interest rate swaps | (177) | | | (208) | |
Accrued taxes | 15 | | | (25) | |
Other current liabilities | 71 | | | (93) | |
Rate reparations, refunds and other litigation reserve adjustments | (97) | | | 48 | |
Other, net | (58) | | | 6 | |
Net Cash Provided by Operating Activities | 4,440 | | | 3,282 | |
Cash Flows From Investing Activities | | | |
| | | |
Acquisitions of assets and investments, net of cash acquired | (1,518) | | | (16) | |
Capital expenditures | (894) | | | (1,351) | |
Proceeds from sales of investments | 417 | | | 907 | |
Contributions to investments | (36) | | | (365) | |
Distributions from equity investments in excess of cumulative earnings | 121 | | | 105 | |
| | | |
Other, net | (1) | | | (56) | |
Net Cash Used in Investing Activities | (1,911) | | | (776) | |
Cash Flows From Financing Activities | | | |
Issuances of debt | 4,950 | | | 3,888 | |
Payments of debt | (6,459) | | | (3,991) | |
Debt issue costs | (20) | | | (23) | |
Dividends | (1,828) | | | (1,764) | |
| | | |
Repurchases of shares | — | | | (50) | |
| | | |
Contributions from investment partner and noncontrolling interests | 4 | | | 11 | |
Distributions to investment partner | (67) | | | (60) | |
| | | |
Distributions to noncontrolling interests | (14) | | | (11) | |
Other, net | (25) | | | (13) | |
Net Cash Used in Financing Activities | (3,459) | | | (2,013) | |
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Deposits | — | | | (3) | |
Net (decrease) increase in Cash, Cash Equivalents and Restricted Deposits | (930) | | | 490 | |
Cash, Cash Equivalents, and Restricted Deposits, beginning of period | 1,209 | | | 209 | |
Cash, Cash Equivalents, and Restricted Deposits, end of period | $ | 279 | | | $ | 699 | |
| | | |
| | | |
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KINDER MORGAN, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In millions, unaudited) |
|
| Six Months Ended June 30, |
| 2022 | | 2021 |
Cash Flows From Operating Activities | | | |
Net income | $ | 1,337 | | | $ | 685 | |
Adjustments to reconcile net income to net cash provided by operating activities | | | |
Depreciation, depletion and amortization | 1,081 | | | 1,069 | |
Deferred income taxes | 369 | | | 105 | |
Amortization of excess cost of equity investments | 38 | | | 35 | |
| | | |
Change in fair market value of derivative contracts | 51 | | | 40 | |
(Gain) loss on divestitures and impairments, net | (21) | | | 1,598 | |
Gain on sale of interest in equity investment (Note 2) | — | | | (206) | |
Earnings from equity investments | (369) | | | (223) | |
Distributions from equity investment earnings | 348 | | | 346 | |
Changes in components of working capital | | | |
Accounts receivable | (414) | | | (130) | |
Inventories | (108) | | | (51) | |
Other current assets | (39) | | | (31) | |
Accounts payable | 499 | | | 145 | |
Accrued interest, net of interest rate swaps | (53) | | | (42) | |
Accrued taxes | (53) | | | (51) | |
Other current liabilities | 86 | | | 195 | |
Rate reparations, refunds and other litigation reserve adjustments | (53) | | | (102) | |
Other, net | (51) | | | (71) | |
Net Cash Provided by Operating Activities | 2,648 | | | 3,311 | |
Cash Flows From Investing Activities | | | |
| | | |
| | | |
Capital expenditures | (779) | | | (545) | |
Proceeds from sales of investments | 4 | | | 413 | |
Contributions to investments | (20) | | | (26) | |
Distributions from equity investments in excess of cumulative earnings | 104 | | | 48 | |
| | | |
Other, net | 19 | | | (1) | |
Net Cash Used in Investing Activities | (672) | | | (111) | |
Cash Flows From Financing Activities | | | |
Issuances of debt | 4,622 | | | 3,110 | |
Payments of debt | (5,848) | | | (4,273) | |
Debt issue costs | (7) | | | (12) | |
Dividends | (1,247) | | | (1,212) | |
| | | |
Repurchases of shares | (173) | | | — | |
| | | |
Contributions from noncontrolling interests | — | | | 3 | |
Distributions to investment partner | — | | | (45) | |
| | | |
Distributions to noncontrolling interests | (53) | | | (8) | |
Other, net | — | | | (3) | |
Net Cash Used in Financing Activities | (2,706) | | | (2,440) | |
| | | |
Net (decrease) increase in Cash, Cash Equivalents and Restricted Deposits | (730) | | | 760 | |
Cash, Cash Equivalents, and Restricted Deposits, beginning of period | 1,147 | | | 1,209 | |
Cash, Cash Equivalents, and Restricted Deposits, end of period | $ | 417 | | | $ | 1,969 | |
| | | |
| | | |
| | | |
| | | |
| KINDER MORGAN, INC. AND SUBSIDIARIES (Continued) | KINDER MORGAN, INC. AND SUBSIDIARIES (Continued) | KINDER MORGAN, INC. AND SUBSIDIARIES (Continued) |
CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In millions, unaudited) | (In millions, unaudited) | (In millions, unaudited) |
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
Cash and Cash Equivalents, beginning of period | Cash and Cash Equivalents, beginning of period | $ | 1,184 | | | $ | 185 | | Cash and Cash Equivalents, beginning of period | $ | 1,140 | | | $ | 1,184 | |
Restricted Deposits, beginning of period | Restricted Deposits, beginning of period | 25 | | | 24 | | Restricted Deposits, beginning of period | 7 | | | 25 | |
Cash, Cash Equivalents, and Restricted Deposits, beginning of period | Cash, Cash Equivalents, and Restricted Deposits, beginning of period | 1,209 | | | 209 | | Cash, Cash Equivalents, and Restricted Deposits, beginning of period | 1,147 | | | 1,209 | |
Cash and Cash Equivalents, end of period | Cash and Cash Equivalents, end of period | 102 | | | 632 | | Cash and Cash Equivalents, end of period | 100 | | | 1,365 | |
Restricted Deposits, end of period | Restricted Deposits, end of period | 177 | | | 67 | | Restricted Deposits, end of period | 317 | | | 604 | |
Cash, Cash Equivalents, and Restricted Deposits, end of period | Cash, Cash Equivalents, and Restricted Deposits, end of period | 279 | | | 699 | | Cash, Cash Equivalents, and Restricted Deposits, end of period | 417 | | | 1,969 | |
Net (decrease) increase in Cash, Cash Equivalents and Restricted Deposits | Net (decrease) increase in Cash, Cash Equivalents and Restricted Deposits | $ | (930) | | | $ | 490 | | Net (decrease) increase in Cash, Cash Equivalents and Restricted Deposits | $ | (730) | | | $ | 760 | |
| Non-cash Investing and Financing Activities | Non-cash Investing and Financing Activities | | Non-cash Investing and Financing Activities | |
ROU assets and operating lease obligations recognized | $ | 35 | | | $ | 15 | | |
Increase in property, plant and equipment from both accruals and contractor retainage | 4 | | | 0 | |
ROU assets and operating lease obligations recognized including adjustments | | ROU assets and operating lease obligations recognized including adjustments | $ | (8) | | | $ | 28 | |
| Supplemental Disclosures of Cash Flow Information | Supplemental Disclosures of Cash Flow Information | | Supplemental Disclosures of Cash Flow Information | |
Cash paid during the period for interest (net of capitalized interest) | Cash paid during the period for interest (net of capitalized interest) | 1,313 | | | 1,440 | | Cash paid during the period for interest (net of capitalized interest) | 792 | | | 807 | |
Cash paid during the period for income taxes, net | Cash paid during the period for income taxes, net | 8 | | | 202 | | Cash paid during the period for income taxes, net | 10 | | | 8 | |
The accompanying notes are an integral part of these consolidated financial statements.
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, unaudited)
| | | Common stock | | | Common stock | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Stockholders’ equity attributable to KMI | | Non-controlling interests | |
| | Issued shares | | Par value | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Stockholders’ equity attributable to KMI | | Non-controlling interests | | Total | | Issued shares | | Par value | | Total |
Balance at June 30, 2021 | 2,265 | | | $ | 23 | | | $ | 41,793 | | | $ | (10,496) | | | $ | (609) | | | $ | 30,711 | | | $ | 429 | | | $ | 31,140 | | |
Balance at March 31, 2022 | | Balance at March 31, 2022 | 2,267 | | | $ | 23 | | | $ | 41,813 | | | $ | (10,544) | | | $ | (674) | | | $ | 30,618 | | | $ | 1,089 | | | $ | 31,707 | |
| Repurchases of shares | | Repurchases of shares | (10) | | | (172) | | | (172) | | | (172) | |
Restricted shares | Restricted shares | 2 | | | (5) | | | (5) | | | (5) | | Restricted shares | | 13 | | | 13 | | | 13 | |
Net income | Net income | | 495 | | | 495 | | | 16 | | | 511 | | Net income | | 635 | | | 635 | | | 18 | | | 653 | |
Distributions | Distributions | | — | | | (6) | | | (6) | | Distributions | | — | | | (27) | | | (27) | |
Contributions | | — | | | 1 | | | 1 | | |
| Dividends | Dividends | | (616) | | | (616) | | | (616) | | Dividends | | (631) | | | (631) | | | (631) | |
| Other comprehensive loss | | (33) | | | (33) | | | (33) | | |
Balance at September 30, 2021 | 2,267 | | | $ | 23 | | | $ | 41,788 | | | $ | (10,617) | | | $ | (642) | | | $ | 30,552 | | | $ | 440 | | | $ | 30,992 | | |
Other comprehensive income | | Other comprehensive income | | 82 | | | 82 | | | 82 | |
Balance at June 30, 2022 | | Balance at June 30, 2022 | 2,257 | | | $ | 23 | | | $ | 41,654 | | | $ | (10,540) | | | $ | (592) | | | $ | 30,545 | | | $ | 1,080 | | | $ | 31,625 | |
| | | Common stock | | | Common stock | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Stockholders’ equity attributable to KMI | | Non-controlling interests | |
| | Issued shares | | Par value | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Stockholders’ equity attributable to KMI | | Non-controlling interests | | Total | | Issued shares | | Par value | | Total |
Balance at June 30, 2020 | 2,261 | | $ | 23 | | | $ | 41,731 | | | $ | (9,802) | | | $ | (199) | | | $ | 31,753 | | | $ | 371 | | | $ | 32,124 | | |
Balance at March 31, 2021 | | Balance at March 31, 2021 | 2,264 | | $ | 23 | | | $ | 41,775 | | | $ | (9,124) | | | $ | (487) | | | $ | 32,187 | | | $ | 416 | | | $ | 32,603 | |
| Restricted shares | Restricted shares | 3 | | 5 | | | 5 | | | 5 | | Restricted shares | 1 | | 18 | | | 18 | | | 18 | |
Net income | | 455 | | | 455 | | | 17 | | | 472 | | |
Net (loss) income | | Net (loss) income | | (757) | | | (757) | | | 17 | | | (740) | |
| Distributions | Distributions | | — | | | (4) | | | (4) | | Distributions | | — | | | (5) | | | (5) | |
Contributions | Contributions | | — | | | 2 | | | 2 | | Contributions | | — | | | 1 | | | 1 | |
Dividends | Dividends | | (598) | | | (598) | | | (598) | | Dividends | | (615) | | | (615) | | | (615) | |
| Other comprehensive loss | Other comprehensive loss | | (56) | | | (56) | | | (56) | | Other comprehensive loss | | (122) | | | (122) | | | (122) | |
Balance at September 30, 2020 | 2,264 | | $ | 23 | | | $ | 41,736 | | | $ | (9,945) | | | $ | (255) | | | $ | 31,559 | | | $ | 386 | | | $ | 31,945 | | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | 2,265 | | $ | 23 | | | $ | 41,793 | | | $ | (10,496) | | | $ | (609) | | | $ | 30,711 | | | $ | 429 | | | $ | 31,140 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Stockholders’ equity attributable to KMI | | Non-controlling interests | | |
| Issued shares | | Par value | | | | | | | Total |
Balance at December 31, 2021 | 2,267 | | | $ | 23 | | | $ | 41,806 | | | $ | (10,595) | | | $ | (411) | | | $ | 30,823 | | | $ | 1,098 | | | $ | 31,921 | |
Impact of adoption of ASU 2020-06 (Note 4) | | | | | (11) | | | | | | | (11) | | | | | (11) | |
Balance at January 1, 2022 | 2,267 | | | 23 | | | 41,795 | | | (10,595) | | | (411) | | | 30,812 | | | 1,098 | | | 31,910 | |
| | | | | | | | | | | | | | | |
Repurchases of shares | (10) | | | | | (173) | | | | | | | (173) | | | | | (173) | |
EP Trust I Preferred security conversions | | | | | 1 | | | | | | | 1 | | | | | 1 | |
Restricted shares | | | | | 31 | | | | | | | 31 | | | | | 31 | |
Net income | | | | | | | 1,302 | | | | | 1,302 | | | 35 | | | 1,337 | |
Distributions | | | | | | | | | | | — | | | (53) | | | (53) | |
| | | | | | | | | | | | | | | |
Dividends | | | | | | | (1,247) | | | | | (1,247) | | | | | (1,247) | |
| | | | | | | | | | | | | | | |
Other comprehensive loss | | | | | | | | | (181) | | | (181) | | | | | (181) | |
Balance at June 30, 2022 | 2,257 | | | $ | 23 | | | $ | 41,654 | | | $ | (10,540) | | | $ | (592) | | | $ | 30,545 | | | $ | 1,080 | | | $ | 31,625 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Stockholders’ equity attributable to KMI | | Non-controlling interests | | |
| Issued shares | | Par value | | | | | | | Total |
Balance at December 31, 2020 | 2,264 | | $ | 23 | | | $ | 41,756 | | | $ | (9,936) | | | $ | (407) | | | $ | 31,436 | | | $ | 402 | | | $ | 31,838 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Restricted shares | 1 | | | | 37 | | | | | | | 37 | | | | | 37 | |
Net income | | | | | | | 652 | | | | | 652 | | | 33 | | | 685 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Distributions | | | | | | | | | | | — | | | (8) | | | (8) | |
Contributions | | | | | | | | | | | — | | | 3 | | | 3 | |
Dividends | | | | | | | (1,212) | | | | | (1,212) | | | | | (1,212) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other | | | | | | | | | | | — | | | (1) | | | (1) | |
Other comprehensive loss | | | | | | | | | (202) | | | (202) | | | | | (202) | |
Balance at June 30, 2021 | 2,265 | | $ | 23 | | | $ | 41,793 | | | $ | (10,496) | | | $ | (609) | | | $ | 30,711 | | | $ | 429 | | | $ | 31,140 | |
The accompanying notes are an integral part of these consolidated financial statements.
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(In millions, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | | | | | | | | | | | |
| Issued shares | | Par value | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Stockholders’ equity attributable to KMI | | Non-controlling interests | | Total |
Balance at December 31, 2020 | 2,264 | | | $ | 23 | | | $ | 41,756 | | | $ | (9,936) | | | $ | (407) | | | $ | 31,436 | | | $ | 402 | | | $ | 31,838 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Restricted shares | 3 | | | | | 32 | | | | | | | 32 | | | | | 32 | |
Net income | | | | | | | 1,147 | | | | | 1,147 | | | 49 | | | 1,196 | |
Distributions | | | | | | | | | | | — | | | (14) | | | (14) | |
Contributions | | | | | | | | | | | — | | | 4 | | | 4 | |
Dividends | | | | | | | (1,828) | | | | | (1,828) | | | | | (1,828) | |
Other | | | | | | | | | | | — | | | (1) | | | (1) | |
Other comprehensive loss | | | | | | | | | (235) | | | (235) | | | | | (235) | |
Balance at September 30, 2021 | 2,267 | | | $ | 23 | | | $ | 41,788 | | | $ | (10,617) | | | $ | (642) | | | $ | 30,552 | | | $ | 440 | | | $ | 30,992 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | | | | | | | | | | | |
| Issued shares | | Par value | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Stockholders’ equity attributable to KMI | | Non-controlling interests | | Total |
Balance at December 31, 2019 | 2,265 | | $ | 23 | | | $ | 41,745 | | | $ | (7,693) | | | $ | (333) | | | $ | 33,742 | | | $ | 344 | | | $ | 34,086 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Repurchases of shares | (4) | | | | | (50) | | | | | | | (50) | | | | | (50) | |
Restricted shares | 3 | | | | 41 | | | | | | | 41 | | | | | 41 | |
Net (loss) income | | | | | | | (488) | | | | | (488) | | | 45 | | | (443) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Distributions | | | | | | | | | | | — | | | (11) | | | (11) | |
Contributions | | | | | | | | | | | — | | | 8 | | | 8 | |
Dividends | | | | | | | (1,764) | | | | | (1,764) | | | | | (1,764) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other comprehensive income | | | | | | | | | 78 | | | 78 | | | | | 78 | |
Balance at September 30, 2020 | 2,264 | | $ | 23 | | | $ | 41,736 | | | $ | (9,945) | | | $ | (255) | | | $ | 31,559 | | | $ | 386 | | | $ | 31,945 | |
The accompanying notes are an integral part of these consolidated financial statements.
KINDER MORGAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
Organization
We are one of the largest energy infrastructure companies in North America. We own an interest in or operate approximately 83,000 miles of pipelines, 144141 terminals, and 700 billion cubic feet of working natural gas storage capacity. Our pipelines transport natural gas, refined petroleum products, renewable fuels, crude oil, condensate, CO2 and other products, and our terminals store and handle various commodities including gasoline, diesel fuel, renewable fuel feedstocks, chemicals, ethanol, metals and petroleum coke.
Basis of Presentation
General
Our accompanying unaudited consolidated financial statements have been prepared under the rules and regulations of the U.S. Securities and Exchange Commission (SEC). These rules and regulations conform to the accounting principles contained in the FASB’s Accounting Standards Codification (ASC), the single source of GAAP. In compliance with such rules and regulations, all significant intercompany items have been eliminated in consolidation.
In our opinion, all adjustments, which are of a normal and recurring nature, considered necessary for a fair statement of our financial position and operating results for the interim periods have been included in the accompanying consolidated financial statements, and certain amounts from prior periods have been reclassified to conform to the current presentation. Interim results are not necessarily indicative of results for a full year; accordingly, you should read these consolidated financial statements in conjunction with our consolidated financial statements and related notes included in our 20202021 Form 10-K.
The accompanying unaudited consolidated financial statements include our accounts and the accounts of our subsidiaries over which we have control or are the primary beneficiary. We evaluate our financial interests in business enterprises to determine if they represent variable interest entities where we are the primary beneficiary. If such criteria are met, we consolidate the financial statements of such businesses with those of our own.
Mas CanAm, LLC Acquisition
On July 19, 2022, we completed an acquisition of 3 landfill assets from Mas CanAm, LLC, comprising a renewable natural gas facility in Arlington, Texas and medium Btu facilities in Shreveport, Louisiana and Victoria, Texas for approximately $358 million including a preliminary purchase price adjustment for working capital.
Goodwill
In addition to periodically evaluating long-lived assets and goodwill for impairment based on changes in market conditions, we evaluate goodwill for impairment on May 31 of each year. For our May 31, 20212022 evaluation, we grouped our businesses into 67 reporting units as follows: (i) Products Pipelines (excluding associated terminals); (ii) Products Pipelines Terminals (evaluated separately from Products Pipelines for goodwill purposes); (iii) Natural Gas Pipelines Regulated; (iv) Natural Gas Pipelines Non-Regulated; (v) CO2; (vi) Terminals and (vi) Terminals. See Note(vii) Energy Transition Ventures.
The fair value estimates used in our goodwill impairment test include Level 3 inputs of the fair value hierarchy. The inputs include valuation estimates using market approach valuation methodologies, which include assumptions primarily involving management’s significant judgments and estimates with respect to market multiples, comparable sales transactions, general economic conditions and the related demand for products handled or transported by our assets. Changes to any one or a combination of these factors would result in a change to the reporting unit fair values, which could lead to future impairment charges. Such potential non-cash impairments could have a significant effect on our results of operations.
The results of our May 31, 2021 goodwill2022 annual impairment test.test indicated that for each of our reporting units, the reporting unit’s fair value exceeded the carrying value.
Earnings per Share
We calculate earnings per share using the two-class method. Earnings were allocated to Class P sharescommon stock and participating securities based on the amount of dividends paid in the current period plus an allocation of the undistributed earnings or excess distributions over earnings to the extent that each security participates in earnings or excess distributions over earnings. Our unvested restricted stock awards, which may be restricted stock or restricted stock units issued to employees and non-employee directors and which include dividend equivalent payments, do not participate in excess distributions over earnings.
The following table sets forth the allocation of net income (loss) available to shareholders of Class P sharescommon stock and participating securities:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions, except per share amounts) | | (In millions, except per share amounts) |
Net Income (Loss) Available to Stockholders | Net Income (Loss) Available to Stockholders | $ | 495 | | | $ | 455 | | | $ | 1,147 | | | $ | (488) | | Net Income (Loss) Available to Stockholders | $ | 635 | | | $ | (757) | | | $ | 1,302 | | | $ | 652 | |
Participating securities: | Participating securities: | | Participating securities: | |
Less: Net Income allocated to restricted stock awards(a) | (4) | | | (3) | | | (10) | | | (9) | | |
Less: Net Income Allocated to Restricted Stock Awards(a) | | Less: Net Income Allocated to Restricted Stock Awards(a) | (2) | | | (3) | | | (6) | | | (6) | |
Net Income (Loss) Allocated to Class P Stockholders | Net Income (Loss) Allocated to Class P Stockholders | $ | 491 | | | $ | 452 | | | $ | 1,137 | | | $ | (497) | | Net Income (Loss) Allocated to Class P Stockholders | $ | 633 | | | $ | (760) | | | $ | 1,296 | | | $ | 646 | |
| Basic Weighted Average Shares Outstanding | Basic Weighted Average Shares Outstanding | 2,267 | | | 2,263 | | | 2,265 | | | 2,263 | | Basic Weighted Average Shares Outstanding | 2,265 | | | 2,265 | | | 2,266 | | | 2,264 | |
Basic Earnings (Loss) Per Share | Basic Earnings (Loss) Per Share | $ | 0.22 | | | $ | 0.20 | | | $ | 0.50 | | | $ | (0.22) | | Basic Earnings (Loss) Per Share | $ | 0.28 | | | $ | (0.34) | | | $ | 0.57 | | | $ | 0.29 | |
(a)As of SeptemberJune 30, 2021,2022, there were approximately 1312 million restricted stock awards outstanding.
The following table presents the maximum number of potential common stock equivalents which are antidilutive and accordingly are excluded from the determination of diluted earnings per share:share. As we have no other common stock equivalents, our diluted earnings per share are the same as our basic earnings per share for all periods presented.
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions on a weighted average basis) | | (In millions on a weighted average basis) |
Unvested restricted stock awards | Unvested restricted stock awards | 13 | | | 13 | | | 13 | | | 13 | | Unvested restricted stock awards | 12 | | | 12 | | | 13 | | | 12 | |
Convertible trust preferred securities | Convertible trust preferred securities | 3 | | | 3 | | | 3 | | | 3 | | Convertible trust preferred securities | 3 | | | 3 | | | 3 | | | 3 | |
2. Acquisitions
As of September 30, 2021, our preliminary allocation of the purchase price for significant acquisitions completed during the nine months ended September 30, 2021 are detailed below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Assignment of Purchase Price |
Ref | Date | Acquisition | Purchase price | | Current assets | | Property, plant & equipment | | Deferred charges & other | | Goodwill | | Current liabilities | | Long-term liabilities |
| | | (In millions) |
(1) | 8/21 | Kinetrex Energy | $ | 318 | | | $ | 17 | | | $ | 49 | | | $ | 262 | | | $ | 64 | | | $ | (6) | | | $ | (68) | |
(2) | 7/21 | Stagecoach Gas Services LLC | 1,228 | | | 52 | | | 1,041 | | | 23 | | | 118 | | | (6) | | | — | |
Pro Forma Information
Pro forma consolidated income statement information that gives effect to the above acquisitions as if they had occurred as of January 1, 2021 is not presented because it would not be materially different from the information presented in our accompanying consolidated statements of operations.
(1) Kinetrex Energy Acquisition
On August 20, 2021, we completed the acquisition of Indianapolis-based Kinetrex Energy (Kinetrex) from an affiliate of Parallel49 Equity for $318 million, including a preliminary purchase price adjustment for working capital. Deferred charges and other within the preliminary purchase price allocation includes $63 million related to an equity investment and $199 million related to a customer relationship with an amortization period of approximately 10 years. Kinetrex is a supplier of liquefied natural gas in the Midwest and a producer and supplier of renewable natural gas (RNG) under long-term contracts to transportation service providers. Kinetrex has a 50% interest in the largest RNG facility in Indiana and we commenced construction on 3 additional landfill-based RNG facilities in September 2021. The acquired assets align with our strategy to invest in low-carbon energy and are included as part of our new Energy Transition Ventures group within our CO2 business segment.
(2) Stagecoach Acquisition
On July 9, 2021, we completed the acquisition of subsidiaries of Stagecoach Gas Services LLC (Stagecoach), a natural gas pipeline and storage joint venture between Consolidated Edison, Inc. and Crestwood Equity Partners, LP, for approximately $1,228 million, including a preliminary purchase price adjustment for working capital. Deferred charges and other within the preliminary purchase price allocation relates to customer contracts with a weighted average amortization period of less than 2 years. The Stagecoach assets include 4 natural gas storage facilities with a total FERC-certificated working capacity of 41 Bcf and a network of FERC-regulated natural gas transportation pipelines with multiple interconnects to major interstate natural gas pipelines in the northeast region of the U.S., including TGP. The acquired assets complement and expand our natural gas pipeline and storage business and are included in our Natural Gas Pipelines business segment.
Goodwill
After measuring all of the identifiable tangible and intangible assets acquired and liabilities assumed at fair value on the acquisition date, the excess purchase price is assigned to goodwill. Goodwill is an intangible asset representing the future economic benefits expected to be derived from an acquisition that are not assigned to other identifiable, separately recognizable assets. We believe the primary items that generated our goodwill are both the value of the synergies created between the acquired assets and our pre-existing assets, and our expected ability to grow the business we acquired by leveraging our pre-existing business experience. Of our acquisitions made during the nine months ended September 30, 2021, goodwill of $118 million associated with our Stagecoach acquisition is tax deductible and we apply a look through method of recording deferred income taxes on the outside book-tax basis differences in our investments. As a result, no deferred income taxes are recorded associated with non-deductible goodwill recorded at the investee level.
Changes in the amounts of our goodwill for the nine months ended September 30, 2021 are summarized by reporting unit as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Natural Gas Pipelines Regulated | | Natural Gas Pipelines Non-Regulated | | CO2 | | Products Pipelines | | Products Pipelines Terminals | | Terminals | | Energy Transition Ventures | | Total |
| (In millions) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Goodwill as of December 31, 2020 | $ | 14,249 | | | $ | 2,343 | | | $ | 928 | | | $ | 1,378 | | | $ | 151 | | | $ | 802 | | | $ | — | | | $ | 19,851 | |
Acquisitions | 118 | | | — | | | — | | | — | | | — | | | — | | | 64 | | | 182 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Goodwill as of September 30, 2021 | $ | 14,367 | | | $ | 2,343 | | | $ | 928 | | | $ | 1,378 | | | $ | 151 | | | $ | 802 | | | $ | 64 | | | $ | 20,033 | |
| | | | | | | | | | | | | | | |
3. Losses and Gains on Impairments, Divestitures and Other Write-downs
We recognized the following pre-tax losses (gains) on impairments, divestitures and other write-downs, net on assets during the three and nine months ended September 30, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (In millions) |
Natural Gas Pipelines | | | | | | | |
Impairment of long-lived and intangible assets(a) | $ | — | | | $ | — | | | $ | 1,600 | | | $ | — | |
Impairment of goodwill(a) | — | | | — | | | — | | | 1,000 | |
Gain on sale of interest in NGPL Holdings LLC(a) | — | | | — | | | (206) | | | — | |
Loss on write-down of related party note receivable(a) | — | | | — | | | 117 | | | — | |
Loss (gain) on divestitures of long-lived assets and other write-downs | — | | | 11 | | | (1) | | | 11 | |
Products Pipelines | | | | | | | |
Impairment of long-lived and intangible assets | — | | | — | | | — | | | 21 | |
| | | | | | | |
Terminals | | | | | | | |
Impairment of long-lived and intangible assets | 14 | | | — | | | 14 | | | 5 | |
| | | | | | | |
CO2 | | | | | | | |
Impairment of goodwill(a) | — | | | — | | | — | | | 600 | |
Impairment of long-lived assets(a) | — | | | — | | | — | | | 350 | |
Gain on divestitures of long-lived assets, net | (11) | | | — | | | (8) | | | — | |
Other loss (gain) on divestitures of long-lived assets, net | 1 | | | — | | | (3) | | | — | |
Pre-tax loss on impairments, divestitures and other write-downs, net | $ | 4 | | | $ | 11 | | | $ | 1,513 | | | $ | 1,987 | |
| | | | | | | |
(a)See below for a further discussion of these items.Long-lived Asset Impairment
Impairments
Long-lived Assets
During the second quarter of 2021, we evaluated our South Texas gathering and processing assets within our Natural Gas Pipeline business segment for impairment, which was driven by lower expectations regarding the volumes and rates associated with the re-contracting of contracts expiring through 2024. The long-lived asset impairment test involved two steps. Step one was an assessment as to whether the asset’s net book value was expected to be recovered from the estimated undiscounted future cash flows. To compute the estimated undiscounted future cash flows we included an unfavorable adjustment for upcoming contract expirations. With this inclusion, our South Texas gathering and processing assets failed step one. In step two, weWe utilized an income approach to estimate fair value and compared it to the carrying value. We applied an approximate 8.5%The significant assumptions made in calculating fair value include estimates of future cash flows and discount rate,rates, a Level 3 input, which we believed represented the estimated weighted average cost of capital of a theoretical market participant. input. As a result of our evaluation, we recognized a non-cash, long-lived asset impairment of $1,600 million during the ninesix months ended SeptemberJune 30, 2021.
During the first half of 2020, the energy production and demand factors related to COVID-19 and the sharp decline in commodity prices represented a triggering event that required us to perform impairment testing on certain businesses that are sensitive to commodity prices. As a result, we performed an impairment analysis of long-lived assets within our CO2 business segment which resulted in a non-cash impairment of long-lived assets within our CO2 business segment shown in the above table during the nine months ended September 30, 2020.
GoodwillInvestment in Ruby
During the first quarter of 2021, we recognized a pre-tax charge of $117 million related to a write-down of our subordinated note receivable from our equity investee, Ruby, which is included within “Earnings from equity investments” on our accompanying consolidated statement of operations for the six months ended June 30, 2021. The write-down was driven by the impairment recognized by Ruby of its assets.
Ruby Chapter 11 Bankruptcy Filing
The resultsbalance of our May 31, 2021 annual impairment test indicated that for each of our reporting units, the reporting unit fair value exceeded the carrying value. The fair value estimates usedRuby Pipeline, L.L.C.’s 2022 unsecured notes matured on April 1, 2022 in the goodwill impairment test are primarily based on Level 3 inputsprincipal amount of the fair value hierarchy. The inputs include valuation estimates using market and income approach valuation methodologies, which include assumptions primarily involving management’s significant judgments and estimates with respect$475 million. Although Ruby has sufficient liquidity to operate its business, it lacked sufficient liquidity to satisfy its
to market multiples, comparable sales transactions, weighted average costsobligations under the 2022 unsecured notes on the maturity date of capital, general economic conditions and the related demandApril 1, 2022. Accordingly, on March 31, 2022, Ruby filed a voluntary petition for products handled or transported by our assets as well as assumptions regarding future cash flows based on production growth rate assumptions, terminal values and discount rates. We use primarily a market approach and, in some instances where deemed necessary, also use discounted cash flow analyses to determine the fair value of our assets. We use discount rates representing our estimaterelief under Chapter 11 of the risk-adjusted discount rates that would be used by market participants specificUnited States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Ruby, as the debtor, will continue to operate in the particular reporting unit.
Duringordinary course as a debtor in possession under the jurisdiction of the United States Bankruptcy Court. We fully impaired our equity investment in Ruby in the fourth quarter of 2019 and fully impaired our investment in Ruby’s subordinated notes in the first quarter of 2020, we conducted interim impairment tests2021. We had 0 amounts included in our “Investments” on our accompanying consolidated balance sheets associated with Ruby as of goodwill for our CO2 and Natural Gas Pipelines Non-Regulated reporting units, and during the second quarter 2020, we conducted our annual impairment test of goodwill for all of our reporting units which resulted in non-cash impairments of goodwill within our CO2 and Natural Gas Pipelines business segments during the nine months ended SeptemberJune 30, 2020 as shown in the table above.2022 or December 31, 2021.
As conditions warrant, we routinely evaluate our assets for potential triggering events that could impact the fair value of certain assets or our ability to recover the carrying value of long-lived assets. Such assets include accounts receivable, equity investments, goodwill, other intangibles and property plant and equipment, including oil and gas properties and in-process construction. Depending on the nature of the asset, these evaluations require the use of significant judgments including but not limited to judgments related to customer credit worthiness, future volume expectations, current and future commodity prices, discount rates, regulatory environment, as well as general economic conditions and the related demand for products handled or transported by our assets. Because certain of our assets have been written down to fair value, or its fair value is close to carrying value, any deterioration in fair value could result in further impairments. Such non-cash impairments could have a significant effect on our results of operations, which would be recognized in the period in which the carrying value is determined to not be recoverable.
Sale of an Interest in NGPL Holdings
On March 8, 2021, we and Brookfield Infrastructure Partners L.P. (Brookfield) completed the sale of a combined 25% interest in our joint venture, NGPL Holdings LLC (NGPL Holdings), to a fund controlled by ArcLight Capital Partners, LLC (ArcLight). We received net proceeds of $412$413 million for our proportionate share of the interests sold which included the transfer of $125 million of our $500 million related party promissory note receivable from NGPL Holdings to ArcLight with quarterly interest payments at 6.75%.sold. We recognized a pre-tax gain of $206 million for our proportionate share, which is included within “Other, net” inon our accompanying consolidated statement of operations for the ninesix months ended SeptemberJune 30, 2021. We and Brookfield now each hold a 37.5% interest in NGPL Holdings.
Other Write-downs
During the first quarter of 2021, we recognized a pre-tax charge of $117 million related to a write-down of our subordinated note receivable from our equity investee, Ruby, driven by the recent impairment by Ruby of its assets, which is included within “Earnings from equity investments” in our accompanying consolidated statement of operations for the nine months ended September 30, 2021. The impairment at Ruby was the result of upcoming contract expirations and additional uncertainty identified in late February 2021 regarding the proposed development of a third party liquefied natural gas exporting facility that could significantly increase the demand for its services.
4.3. Debt
The following table provides information on the principal amount of our outstanding debt balances:
| | | | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| | | (In millions, unless otherwise stated) | | (In millions, unless otherwise stated) |
Current portion of debt | Current portion of debt | | | Current portion of debt | |
| $3.5 billion credit facility due August 20, 2026(a) | $3.5 billion credit facility due August 20, 2026(a) | | $ | — | | | $ | — | | $3.5 billion credit facility due August 20, 2026(a) | | $ | — | | | $ | — | |
$500 million credit facility due November 16, 2023(a) | $500 million credit facility due November 16, 2023(a) | | — | | | — | | $500 million credit facility due November 16, 2023(a) | | — | | | — | |
Commercial paper notes(a) | Commercial paper notes(a) | | 160 | | | — | | Commercial paper notes(a) | | 936 | | | — | |
Current portion of senior notes | Current portion of senior notes | | | Current portion of senior notes | |
5.00%, due February 2021(b) | | — | | | 750 | | |
3.50%, due March 2021(b) | | — | | | 750 | | |
5.80%, due March 2021(b) | | — | | | 400 | | |
5.00%, due October 2021(c) | | — | | | 500 | | |
8.625%, due January 2022 | | 260 | | | — | | |
4.15%, due March 2022 | | 375 | | | — | | |
1.50%, due March 2022(d) | | 869 | | | — | | |
3.95% due September 2022 | | 1,000 | | | — | | |
8.625%, due January 2022(b) | | 8.625%, due January 2022(b) | | — | | | 260 | |
4.15%, due March 2022(b) | | 4.15%, due March 2022(b) | | — | | | 375 | |
1.50%, due March 2022(b)(c) | | 1.50%, due March 2022(b)(c) | | — | | | 853 | |
3.95% due September 2022(d) | | 3.95% due September 2022(d) | | — | | | 1,000 | |
3.15% due January 2023 | | 3.15% due January 2023 | | 1,000 | | | — | |
Floating rate, due January 2023(e) | | Floating rate, due January 2023(e) | | 250 | | | — | |
3.45% due February 2023 | | 3.45% due February 2023 | | 625 | | | — | |
Trust I preferred securities, 4.75%, due March 2028 | Trust I preferred securities, 4.75%, due March 2028 | | 111 | | | 111 | | Trust I preferred securities, 4.75%, due March 2028 | | 111 | | | 111 | |
Current portion of other debt | Current portion of other debt | | 47 | | | 47 | | Current portion of other debt | | 48 | | | 47 | |
Total current portion of debt | Total current portion of debt | | 2,822 | | | 2,558 | | Total current portion of debt | | 2,970 | | | 2,646 | |
| Long-term debt (excluding current portion) | Long-term debt (excluding current portion) | | | Long-term debt (excluding current portion) | |
Senior notes | Senior notes | | 28,306 | | | 30,141 | | Senior notes | | 27,477 | | | 29,097 | |
EPC Building, LLC, promissory note, 3.967%, due 2020 through 2035 | | 353 | | | 364 | | |
EPC Building, LLC, promissory note, 3.967%, due 2023 through 2035 | | EPC Building, LLC, promissory note, 3.967%, due 2023 through 2035 | | 339 | | | 348 | |
| Trust I preferred securities, 4.75%, due March 2028 | Trust I preferred securities, 4.75%, due March 2028 | | 110 | | | 110 | | Trust I preferred securities, 4.75%, due March 2028 | | 109 | | | 110 | |
Other | Other | | 219 | | | 223 | | Other | | 215 | | | 217 | |
Total long-term debt | Total long-term debt | | 28,988 | | | 30,838 | | Total long-term debt | | 28,140 | | | 29,772 | |
Total debt(e) | | $ | 31,810 | | | $ | 33,396 | | |
Total debt(f) | | Total debt(f) | | $ | 31,110 | | | $ | 32,418 | |
(a)On August 20, 2021, we entered into an agreement for a new five-year credit facility and amended our existing credit facility discussed further in “—Credit Facilities and Restrictive Covenants” following.Weighted average interest rate on borrowings outstanding as of June 30, 2022 was 1.90%.
(b)We repaid the principal amounts onamount of these senior notes during the first quarter of 2021.2022.
(c)These notes were repaid on July 1, 2021.
(d)Consists of senior notes denominated in Euros that have been converted to U.S. dollars. The September 30,December 31, 2021 balance is reported above at the exchange rate of 1.15801.1370 U.S. dollars per Euro. As of September 30,December 31, 2021, the cumulative change in the exchange rate of U.S. dollars per Euro since issuance had resulted in an increase to our debt balance of $54$38 million related to these notes. The cumulative increase in debt due to the changes in exchange rates for the 1.50% notes, due 2022 iswhich was offset by a corresponding change in the value of cross-currency swaps reflected in “Other current assets”“Current Assets—Fair value of derivative contracts” and “Other current liabilities”“Current Liabilities—Fair value of derivative contracts” on our accompanying consolidated balance sheets.sheet. At the time of issuance, we entered into foreign currency contracts associated with these senior notes, effectively converting these Euro-denominated senior notes to U.S. dollars (see Note 6 “5 “Risk ManagementRisk Management——Foreign Currency Risk Management”).
(d)We repaid the principal amount of these senior notes on June 1, 2022.
(e)These senior notes have an associated floating-to-fixed interest rate swap agreement which is designated as a cash flow hedge (see Note 5 “Risk Management—Interest Rate Risk Management”).
(f)Excludes our “Debt fair value adjustments” which, as of SeptemberJune 30, 20212022 and December 31, 2020,2021, increased our total debt balances by $1,014$412 million and $1,293$902 million, respectively.
We and substantially all of our wholly owned domestic subsidiaries are parties to a cross guarantee agreement whereby each party to the agreement unconditionally guarantees, jointly and severally, the payment of specified indebtedness of each other party to the agreement.
On February 11, 2021, we23, 2022, EPNG issued in a registeredprivate offering $750$300 million aggregate principal amount of 3.60%3.50% senior notes due 20512032 and received net proceeds of $741 million.$298 million after discount and issuance costs. These notes are guaranteed through the cross guarantee agreement discussed above.
Credit Facilities and Restrictive Covenants
On August 20, 2021, we entered into a new $3.5 billion revolving credit facility (the “New Credit Facility”) due August 2026 with a syndicate of lenders, which can be increased by up to $1.0 billion if certain conditions, including the receipt of additional lender commitments, are met. Borrowings under the New Credit Facility may be used for working capital and other general corporate purposes. On the same date, we also entered into a first amendment (the “Amendment”) to our existing Revolving Credit Agreement, dated as of November 16, 2018 (as amended prior to the Amendment, the “Existing Credit
Facility”). The Amendment provides for certain amendments to the Existing Credit Facility to, among other things, reduce the Existing Credit Facility’s borrowing capacity to $500 million and terminate the letter of credit commitments and the swing line capacity thereunder. The combined credit facilities continue to support our $4 billion commercial paper program.
Depending on the type of loan request, our credit facility borrowings under our New Credit Facility bear interest at either (i) LIBOR adjusted for a eurocurrency funding reserve plus an applicable margin ranging from 1.000% to 1.750% per annum based on our credit ratings or (ii) the greatest of (1) the Federal Funds Rate plus 0.5%; (2) the Prime Rate; or (3) LIBOR for a one-month Eurodollar loan adjusted for a eurocurrency funding reserve, plus 1%, plus, in each case, an applicable margin ranging from 0.100% to 0.750% per annum based on our credit rating. Standby fees for the unused portion of the credit facility will be calculated at a rate ranging from 0.100% to 0.250%. The New Credit Facility also includes customary provisions to provide for replacement of LIBOR with an alternative benchmark rate when LIBOR ceases to be available.
The New Credit Facility contains financial and various other covenants that apply to us and our subsidiaries and are common in such agreements, including a maximum ratio of Consolidated Net Indebtedness to Consolidated EBITDA (as defined in the New Credit Facility) of 5.50 to 1.00, for any four-fiscal-quarter period. Other negative covenants include restrictions on our and certain of our subsidiaries’ ability to incur debt, grant liens, make fundamental changes or engage in certain transactions with affiliates, or in the case of certain material subsidiaries, permit restrictions on dividends, distributions or making or prepayments of loans to us or any guarantor. The New Credit Facility also restricts our ability to make certain restricted payments if an event of default (as defined in the New Credit Facility) has occurred and is continuing or would occur and be continuing.
As of SeptemberJune 30, 2021,2022, we had no borrowings outstanding under our credit facilities, $160$936 million in borrowings outstanding under our commercial paper program and $81 million in letters of credit. Our availability under our credit facilities as of SeptemberJune 30, 20212022 was $3,759 million.$3.0 billion. As of SeptemberJune 30, 2021,2022, we were in compliance with all required covenants.
Fair Value of Financial Instruments
The carrying value and estimated fair value of our outstanding debt balances are disclosed below:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| Carrying value | | Estimated fair value | | Carrying value | | Estimated fair value |
| (In millions) |
Total debt | $ | 32,824 | | | $ | 37,797 | | | $ | 34,689 | | | $ | 39,622 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Carrying value | | Estimated fair value(a) | | Carrying value | | Estimated fair value(a) |
| (In millions) |
Total debt | $ | 31,522 | | | $ | 30,376 | | | $ | 33,320 | | | $ | 37,775 | |
(a)Included in the estimated fair value are amounts for our Trust I Preferred Securities of $203 million and $218 million as of June 30, 2022 and December 31, 2021, respectively.
We used Level 2 input values to measure the estimated fair value of our outstanding debt balance as of both SeptemberJune 30, 20212022 and December 31, 2020.2021.
5.4. Stockholders’ Equity
Class P Common Stock
On July 19, 2017, our board of directors approved a $2 billion common share buy-back program that began in December 2017. SinceDuring the six months ended June 30, 2022, we repurchased approximately 10 million of our shares for $173 million at an average price of $17.37 per share. Subsequent to June 30, 2022 and through July 21, 2022, we repurchased 6 million of our shares for $102 million at an average price of $16.63 per share, and since December 2017, in total, we have repurchased approximately 3249 million of our Class P shares under the program at an average price of approximately $17.71$17.50 per share for approximately $575$850 million.
Dividends
The following table provides information about our per share dividends:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Per share cash dividend declared for the period | Per share cash dividend declared for the period | $ | 0.27 | | | $ | 0.2625 | | | $ | 0.81 | | | $ | 0.7875 | | Per share cash dividend declared for the period | $ | 0.2775 | | | $ | 0.27 | | | $ | 0.555 | | | $ | 0.54 | |
Per share cash dividend paid in the period | Per share cash dividend paid in the period | 0.27 | | | 0.2625 | | | 0.8025 | | | 0.775 | | Per share cash dividend paid in the period | 0.2775 | | | 0.27 | | | 0.5475 | | | 0.5325 | |
On OctoberJuly 20, 2021,2022, our board of directors declared a cash dividend of $0.27$0.2775 per share for the quarterly period ended SeptemberJune 30, 2021,2022, which is payable on NovemberAugust 15, 20212022 to shareholders of record as of the close of business on NovemberAugust 1, 2021.2022.
Adoption of Accounting Pronouncement
On January 1, 2022, we adopted Accounting Standards Update (ASU) No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” This ASU (i) simplifies an issuer’s accounting for convertible instruments by eliminating two of the three models in ASC 470-20 that require separate accounting for embedded conversion features, (ii) amends diluted earnings per share calculations for convertible instruments by requiring the use of the if-converted method and (iii) simplifies the settlement assessment entities are required to perform on contracts that can potentially settle in an entity’s own equity by removing certain requirements. Using the modified retrospective method, the adoption of this ASU resulted in a pre-tax adjustment of $14 million to unwind the remaining unamortized debt discount within “Debt fair value adjustments” on our consolidated balance sheet and an adjustment of $11 million to unwind the balance of the conversion feature classified in “Additional paid in capital” on our consolidated statement of stockholders’ equity for the six months ended June 30, 2022.
Accumulated Other Comprehensive Loss
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Loss
Cumulative revenues, expenses, gains and losses that under GAAP are included within our comprehensive income but excluded from our earnings are reported as “Accumulated other comprehensive loss” within “Stockholders’ Equity” inon our consolidated balance sheets. Changes in the components of our “Accumulated other comprehensive loss” not including non-controlling interests are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Net unrealized gains/(losses) on cash flow hedge derivatives | | Foreign currency translation adjustments | | Pension and other postretirement liability adjustments | | Total accumulated other comprehensive loss |
| (In millions) |
Balance as of December 31, 2020 | $ | (13) | | | $ | — | | | $ | (394) | | | $ | (407) | |
Other comprehensive (loss) gain before reclassifications | (444) | | | — | | | 28 | | | (416) | |
Loss reclassified from accumulated other comprehensive loss | 181 | | | — | | | — | | | 181 | |
Net current-period change in accumulated other comprehensive loss | (263) | | | — | | | 28 | | | (235) | |
Balance as of September 30, 2021 | $ | (276) | | | $ | — | | | $ | (366) | | | $ | (642) | |
| | | | | | | | | | | | | | | | | | | |
| Net unrealized gains/(losses) on cash flow hedge derivatives | | | | Pension and other postretirement liability adjustments | | Total accumulated other comprehensive loss |
| (In millions) |
Balance as of December 31, 2021 | $ | (172) | | | | | $ | (239) | | | $ | (411) | |
Other comprehensive (loss) gain before reclassifications | (489) | | | | | 16 | | | (473) | |
Loss reclassified from accumulated other comprehensive loss | 292 | | | | | — | | | 292 | |
Net current-period change in accumulated other comprehensive (loss) income | (197) | | | | | 16 | | | (181) | |
Balance as of June 30, 2022 | $ | (369) | | | | | $ | (223) | | | $ | (592) | |
| | | Net unrealized gains/(losses) on cash flow hedge derivatives | | Foreign currency translation adjustments | | Pension and other postretirement liability adjustments | | Total accumulated other comprehensive loss | | Net unrealized gains/(losses) on cash flow hedge derivatives | | | Pension and other postretirement liability adjustments | | Total accumulated other comprehensive loss |
| | (In millions) | | (In millions) |
Balance as of December 31, 2019 | $ | (7) | | | $ | — | | | $ | (326) | | | $ | (333) | | |
Balance as of December 31, 2020 | | Balance as of December 31, 2020 | $ | (13) | | | | $ | (394) | | | $ | (407) | |
Other comprehensive (loss) gain before reclassifications | Other comprehensive (loss) gain before reclassifications | (16) | | | 1 | | | 21 | | | 6 | | Other comprehensive (loss) gain before reclassifications | (313) | | | | 22 | | | (291) | |
Loss reclassified from accumulated other comprehensive loss | Loss reclassified from accumulated other comprehensive loss | 72 | | | — | | | — | | | 72 | | Loss reclassified from accumulated other comprehensive loss | 89 | | | | — | | | 89 | |
Net current-period change in accumulated other comprehensive (loss) income | Net current-period change in accumulated other comprehensive (loss) income | 56 | | | 1 | | | 21 | | | 78 | | Net current-period change in accumulated other comprehensive (loss) income | (224) | | | | 22 | | | (202) | |
Balance as of September 30, 2020 | $ | 49 | | | $ | 1 | | | $ | (305) | | | $ | (255) | | |
Balance as of June 30, 2021 | | Balance as of June 30, 2021 | $ | (237) | | | | $ | (372) | | | $ | (609) | |
5. Risk Management
Certain of our business activities expose us to risks associated with unfavorable changes in the market price of natural gas, NGL and crude oil. We also have exposure to interest rate and foreign currency risk as a result of the issuance of our debt obligations. Pursuant to our management’s approved risk management policy, we use derivative contracts to hedge or reduce our exposure to some of these risks.
Energy Commodity Price Risk Management
As of SeptemberJune 30, 2021,2022, we had the following outstanding commodity forward contracts to hedge our forecasted energy commodity purchases and sales:
| | | | | | | | | | | |
| Net open position long/(short) |
Derivatives designated as hedging contracts | | | |
Crude oil fixed price | (15.9)(19.0) | | | MMBbl |
Crude oil basis | (6.4)(5.2) | | | MMBbl |
Natural gas fixed price | (29.5)(55.9) | | | Bcf |
Natural gas basis | (27.1)(45.0) | | | Bcf |
NGL fixed price | (1.0)(0.8) | | | MMBbl |
Derivatives not designated as hedging contracts | | | |
Crude oil fixed price | (1.4)(1.1) | | | MMBbl |
Crude oil basis | (8.7)(6.6) | | | MMBbl |
Natural gas fixed price | (8.7)(9.3) | | | Bcf |
Natural gas basis | (22.8)(22.5) | | | Bcf |
Natural gas options | (0.4) | | | Bcf |
NGL fixed price | (1.9)(1.1) | | | MMBbl |
As of SeptemberJune 30, 2021,2022, the maximum length of time over which we have hedged, for accounting purposes, our exposure to the variability in future cash flows associated with energy commodity price risk is through December 2025.2026.
Interest Rate Risk Management
We utilize interest rate derivatives to hedge our exposure to both changes in the fair value of our fixed rate debt instruments and variability in expected future cash flows attributable to variable interest rate payments. The following table summarizes our outstanding interest rate contracts as of SeptemberJune 30, 2021:2022:
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| | Notional amount | | Accounting treatment | | Maximum term | |
| | (In millions) | | | | | | | |
Derivatives designated as hedging instruments | | | | | | | | | | |
Fixed-to-variable interest rate contracts(a)(b) | | $ | 7,1006,750 | | | Fair value hedge | | March 2035 | |
Variable-to-fixed interest rate contracts | | 250 | | | Cash flow hedge | | January 2023 | |
Derivatives not designated as hedging instruments | | | | | | | | | |
Variable-to-fixed interest rate contracts | | 6,2505,100 | | | Mark-to-Market | | December 2022 | |
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(a)The principal amount of hedged senior notes consisted of $750$100 million included in “Current portion of debt” and $6,350$6,650 million included in “Long-term debt” on our accompanying consolidated balance sheet.
(b)During the three and six months ended June 30, 2022, certain optional expedients as set forth in Topic 848 – Reference Rate Reform were elected on certain of these contracts to preserve fair value hedge accounting treatment. See Note 10 “Recent Accounting Pronouncements” for further information on Topic 848.
During the ninesix months ended SeptemberJune 30, 2021,2022, we entered into fixed-to-variable interest rate swap agreements with a combined notional principal amount of $375$400 million. These agreements were designated as accounting hedges and convert a portion of our fixed rate debt to variable rates through February 2028. In addition, we entered into variable-to-fixed interest rate swap agreements with a combined notional principal amount of $3,750 million. These agreements were not designated as accounting hedges and effectively fixed our LIBOR exposure for a portion of our fixed-to-variable interest rate swaps for 2022.2032.
Foreign Currency Risk Management
We utilize foreign currency derivatives to hedge our exposure to variability in foreign exchange rates. The following table summarizes our outstanding foreign currency contracts as of SeptemberJune 30, 2021:2022:
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| | Notional amount | | Accounting treatment | | Maximum term | |
| | (In millions) | | | | | | | |
Derivatives designated as hedging instruments | | | | | | | | | | |
EUR-to-USD cross currency swap contracts(a) | | $ | 1,358543 | | | Cash flow hedge | | March 2027 | |
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(a)These swaps eliminate the foreign currency risk associated with our Euro-denominated debt.
Impact of Derivative Contracts on Our Consolidated Financial Statements
The following table summarizes the fair values of our derivative contracts included inon our accompanying consolidated balance sheets:
| Fair Value of Derivative Contracts | Fair Value of Derivative Contracts | Fair Value of Derivative Contracts |
| | Derivatives Asset | | Derivatives Liability | | Derivatives Asset | | Derivatives Liability |
| | September 30, 2021 | | December 31, 2020 | | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 | | June 30, 2022 | | December 31, 2021 |
| | Location | | Fair value | | Fair value | | Location | | Fair value | | Fair value |
| | (In millions) | | (In millions) |
Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | Derivatives designated as hedging instruments | |
Energy commodity derivative contracts | Energy commodity derivative contracts | | Fair value of derivative contracts/(Other current liabilities) | | $ | 13 | | | $ | 42 | | | $ | (256) | | | $ | (33) | | Energy commodity derivative contracts | | Fair value of derivative contracts/(Fair value of derivative contracts) | | $ | 58 | | | $ | 61 | | | $ | (357) | | | $ | (141) | |
| | Deferred charges and other assets/(Other long-term liabilities and deferred credits) | | 1 | | | 33 | | | (96) | | | (8) | | | Deferred charges and other assets/(Other long-term liabilities and deferred credits) | | 4 | | | 3 | | | (193) | | | (94) | |
Subtotal | Subtotal | | 14 | | | 75 | | | (352) | | | (41) | | Subtotal | | 62 | | | 64 | | | (550) | | | (235) | |
Interest rate contracts | Interest rate contracts | | Fair value of derivative contracts/(Other current liabilities) | | 127 | | | 119 | | | (4) | | | (3) | | Interest rate contracts | | Fair value of derivative contracts/(Fair value of derivative contracts) | | 6 | | | 101 | | | (38) | | | (3) | |
| | Deferred charges and other assets/(Other long-term liabilities and deferred credits) | | 350 | | | 575 | | | (14) | | | (7) | | | Deferred charges and other assets/(Other long-term liabilities and deferred credits) | | 59 | | | 284 | | | (132) | | | (15) | |
Subtotal | Subtotal | | 477 | | | 694 | | | (18) | | | (10) | | Subtotal | | 65 | | | 385 | | | (170) | | | (18) | |
Foreign currency contracts | Foreign currency contracts | | Fair value of derivative contracts/(Other current liabilities) | | 49 | | | — | | | (6) | | | (6) | | Foreign currency contracts | | Fair value of derivative contracts/(Fair value of derivative contracts) | | — | | | 35 | | | (9) | | | (3) | |
| | Deferred charges and other assets/(Other long-term liabilities and deferred credits) | | 20 | | | 138 | | | — | | | — | | | Deferred charges and other assets/(Other long-term liabilities and deferred credits) | | — | | | 6 | | | (27) | | | — | |
Subtotal | Subtotal | | 69 | | | 138 | | | (6) | | | (6) | | Subtotal | | — | | | 41 | | | (36) | | | (3) | |
Total | Total | | 560 | | | 907 | | | (376) | | | (57) | | Total | | 127 | | | 490 | | | (756) | | | (256) | |
| Derivatives not designated as hedging instruments | Derivatives not designated as hedging instruments | | Derivatives not designated as hedging instruments | |
Energy commodity derivative contracts | Energy commodity derivative contracts | | Fair value of derivative contracts/(Other current liabilities) | | 10 | | | 24 | | | (63) | | | (21) | | Energy commodity derivative contracts | | Fair value of derivative contracts/(Fair value of derivative contracts) | | 18 | | | 11 | | | (117) | | | (31) | |
| | Deferred charges and other assets/(Other long-term liabilities and deferred credits) | | 4 | | | — | | | (3) | | | — | | | Deferred charges and other assets/(Other long-term liabilities and deferred credits) | | 11 | | | 1 | | | (42) | | | (6) | |
Subtotal | Subtotal | | 14 | | | 24 | | | (66) | | | (21) | | Subtotal | | 29 | | | 12 | | | (159) | | | (37) | |
Interest rate contracts | Interest rate contracts | | Fair value of derivative contracts/(Other current liabilities) | | — | | | — | | | (1) | | | — | | Interest rate contracts | | Fair value of derivative contracts/(Fair value of derivative contracts) | | 59 | | | 12 | | | — | | | — | |
| | | Deferred charges and other assets/(Other long-term liabilities and deferred credits) | | 1 | | | — | | | — | | | — | | |
Subtotal | | 1 | | | — | | | (1) | | | — | | |
| | Total | Total | | 15 | | | 24 | | | (67) | | | (21) | | Total | | 88 | | | 24 | | | (159) | | | (37) | |
Total derivatives | Total derivatives | | $ | 575 | | | $ | 931 | | | $ | (443) | | | $ | (78) | | Total derivatives | | $ | 215 | | | $ | 514 | | | $ | (915) | | | $ | (293) | |
The following two tables summarize the fair value measurements of our derivative contracts based on the three levels established by the ASC. The tables also identify the impact of derivative contracts which we have elected to present on our accompanying consolidated balance sheets on a gross basis that are eligible for netting under master netting agreements.
| | | Balance sheet asset fair value measurements by level | | | | | Balance sheet asset fair value measurements by level | | | |
| | Level 1 | | Level 2 | | Level 3 | | Gross amount | | Contracts available for netting | | Cash collateral held(b) | | Net amount | | Level 1 | | Level 2 | | Level 3 | | Gross amount | | Contracts available for netting | | Cash collateral held(b) | | Net amount |
| | (In millions) | | (In millions) |
As of September 30, 2021 | | |
As of June 30, 2022 | | As of June 30, 2022 | |
Energy commodity derivative contracts(a) | | Energy commodity derivative contracts(a) | $ | 52 | | | $ | 39 | | | $ | — | | | $ | 91 | | | $ | (90) | | | $ | — | | | $ | 1 | |
Interest rate contracts | | Interest rate contracts | — | | | 124 | | | — | | | 124 | | | — | | | — | | | 124 | |
| As of December 31, 2021 | | As of December 31, 2021 | |
Energy commodity derivative contracts(a) | Energy commodity derivative contracts(a) | $ | 15 | | | $ | 13 | | | $ | — | | | $ | 28 | | | $ | (26) | | | $ | — | | | $ | 2 | | Energy commodity derivative contracts(a) | $ | 56 | | | $ | 20 | | | $ | — | | | $ | 76 | | | $ | (53) | | | $ | (20) | | | $ | 3 | |
Interest rate contracts | Interest rate contracts | — | | | 478 | | | — | | | 478 | | | (9) | | | — | | | 469 | | Interest rate contracts | — | | | 397 | | | — | | | 397 | | | (9) | | | — | | | 388 | |
Foreign currency contracts | Foreign currency contracts | — | | | 69 | | | — | | | 69 | | | (6) | | | — | | | 63 | | Foreign currency contracts | — | | | 41 | | | — | | | 41 | | | (3) | | | — | | | 38 | |
As of December 31, 2020 | | |
Energy commodity derivative contracts(a) | $ | 6 | | | $ | 93 | | | $ | — | | | $ | 99 | | | $ | (35) | | | $ | — | | | $ | 64 | | |
Interest rate contracts | — | | | 694 | | | — | | | 694 | | | (2) | | | — | | | 692 | | |
Foreign currency contracts | — | | | 138 | | | — | | | 138 | | | (6) | | | — | | | 132 | | |
| | | Balance sheet liability fair value measurements by level | | | | | Balance sheet liability fair value measurements by level | | | |
| | Level 1 | | Level 2 | | Level 3 | | Gross amount | | Contracts available for netting | | Cash collateral posted(b) | | Net amount | | Level 1 | | Level 2 | | Level 3 | | Gross amount | | Contracts available for netting | | Cash collateral posted(b) | | Net amount |
| | (In millions) | | (In millions) |
As of September 30, 2021 | | |
As of June 30, 2022 | | As of June 30, 2022 | |
Energy commodity derivative contracts(a) | Energy commodity derivative contracts(a) | $ | (111) | | | $ | (307) | | | $ | — | | | $ | (418) | | | $ | 26 | | | $ | 135 | | | $ | (257) | | Energy commodity derivative contracts(a) | $ | (96) | | | $ | (613) | | | $ | — | | | $ | (709) | | | $ | 90 | | | $ | 125 | | | $ | (494) | |
Interest rate contracts | Interest rate contracts | — | | | (19) | | | — | | | (19) | | | 9 | | | — | | | (10) | | Interest rate contracts | — | | | (170) | | | — | | | (170) | | | — | | | — | | | (170) | |
Foreign currency contracts | Foreign currency contracts | — | | | (6) | | | — | | | (6) | | | 6 | | | — | | | — | | Foreign currency contracts | — | | | (36) | | | — | | | (36) | | | — | | | — | | | (36) | |
As of December 31, 2020 | | |
As of December 31, 2021 | | As of December 31, 2021 | |
Energy commodity derivative contracts(a) | Energy commodity derivative contracts(a) | $ | (7) | | | $ | (56) | | | $ | — | | | $ | (63) | | | $ | 35 | | | $ | (8) | | | $ | (36) | | Energy commodity derivative contracts(a) | $ | (15) | | | $ | (257) | | | $ | — | | | $ | (272) | | | $ | 53 | | | $ | — | | | $ | (219) | |
Interest rate contracts | Interest rate contracts | — | | | (10) | | | — | | | (10) | | | 2 | | | — | | | (8) | | Interest rate contracts | — | | | (18) | | | — | | | (18) | | | 9 | | | — | | | (9) | |
Foreign currency contracts | Foreign currency contracts | — | | | (6) | | | — | | | (6) | | | 6 | | | — | | | — | | Foreign currency contracts | — | | | (3) | | | — | | | (3) | | | 3 | | | — | | | — | |
(a)Level 1 consists primarily of NYMEX natural gas futures. Level 2 consists primarily of OTC WTI swaps, NGL swaps and crude oil basis swaps.
(b)Any cash collateral paid or received is reflected in this table, but only to the extent that it represents variation margins. Any amount associated with derivative prepayments or initial margins that are not influenced by the derivative asset or liability amounts or those that are determined solely on their volumetric notional amounts are excluded from this table.
The following tables summarize the pre-tax impact of our derivative contracts inon our accompanying consolidated statements of operations and comprehensive income (loss):
| Derivatives in fair value hedging relationships | Derivatives in fair value hedging relationships | | Location | | Gain/(loss) recognized in income on derivative and related hedged item | Derivatives in fair value hedging relationships | | Location | | Gain/(loss) recognized in income on derivative and related hedged item |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions) | | (In millions) |
Interest rate contracts | Interest rate contracts | | Interest, net | | $ | (39) | | | $ | (50) | | | $ | (228) | | | $ | 409 | | Interest rate contracts | | Interest, net | | $ | (160) | | | $ | 28 | | | $ | (476) | | | $ | (189) | |
| Hedged fixed rate debt(a) | Hedged fixed rate debt(a) | | Interest, net | | $ | 39 | | | $ | 50 | | | $ | 229 | | | $ | (418) | | Hedged fixed rate debt(a) | | Interest, net | | $ | 162 | | | $ | (28) | | | $ | 482 | | | $ | 190 | |
(a)As of SeptemberJune 30, 2021,2022, the cumulative amount of fair value hedging adjustments to our hedged fixed rate debt was an increasea decrease of $473$106 million included in “Debt fair value adjustments” on our accompanying consolidated balance sheet.
| Derivatives in cash flow hedging relationships | Derivatives in cash flow hedging relationships | | Gain/(loss) recognized in OCI on derivative(a) | | Location | | Gain/(loss) reclassified from Accumulated OCI into income(b) | Derivatives in cash flow hedging relationships | | Gain/(loss) recognized in OCI on derivative(a) | | Location | | Gain/(loss) reclassified from Accumulated OCI into income(b) |
| | Three Months Ended September 30, | | Three Months Ended September 30, | | Three Months Ended June 30, | | Three Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions) | | (In millions) | | (In millions) | | (In millions) |
Energy commodity derivative contracts | Energy commodity derivative contracts | | $ | (140) | | | $ | (143) | | | Revenues—Commodity sales | | $ | (94) | | | $ | (47) | | Energy commodity derivative contracts | | $ | (70) | | | $ | (215) | | | Revenues—Commodity sales | | $ | (185) | | | $ | (53) | |
| | | Costs of sales | | 8 | | | (7) | | | Costs of sales | | 7 | | | (2) | |
Interest rate contracts | Interest rate contracts | | 1 | | | — | | | Earnings from equity investments(c) | | — | | | (1) | | Interest rate contracts | | 3 | | | 1 | | | Earnings from equity investments(c) | | — | | | — | |
Foreign currency contracts | Foreign currency contracts | | (33) | | | 70 | | | Other, net | | (34) | | | 61 | | Foreign currency contracts | | (35) | | | 10 | | | Other, net | | (27) | | | 16 | |
Total | Total | | $ | (172) | | | $ | (73) | | | Total | | $ | (120) | | | $ | 6 | | Total | | $ | (102) | | | $ | (204) | | | Total | | $ | (205) | | | $ | (39) | |
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Derivatives in cash flow hedging relationships | | Gain/(loss) recognized in OCI on derivative(a) | | Location | | Gain/(loss) reclassified from Accumulated OCI into income(b) |
| | Nine Months Ended September 30, | | | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | | | 2021 | | 2020 |
| | (In millions) | | | | (In millions) |
Energy commodity derivative contracts | | $ | (514) | | | $ | (29) | | | Revenues—Commodity sales | | $ | (167) | | | $ | (145) | |
| | | | | | | | | | |
| | | | | | Costs of sales | | 10 | | | (12) | |
Interest rate contracts | | 3 | | | (9) | | | Earnings from equity investments(c) | | — | | | (1) | |
Foreign currency contracts | | (68) | | | 17 | | | Other, net | | (79) | | | 64 | |
Total | | $ | (579) | | | $ | (21) | | | Total | | $ | (236) | | | $ | (94) | |
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Derivatives in cash flow hedging relationships | | Gain/(loss) recognized in OCI on derivative(a) | | Location | | Gain/(loss) reclassified from Accumulated OCI into income(b) |
| | Six Months Ended June 30, | | | | Six Months Ended June 30, |
| | 2022 | | 2021 | | | | 2022 | | 2021 |
| | (In millions) | | | | (In millions) |
Energy commodity derivative contracts | | $ | (569) | | | $ | (374) | | | Revenues—Commodity sales | | $ | (317) | | | $ | (73) | |
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| | | | | | Costs of sales | | 17 | | | 2 | |
Interest rate contracts | | 6 | | | 2 | | | Earnings from equity investments(c) | | — | | | — | |
Foreign currency contracts | | (75) | | | (35) | | | Other, net | | (81) | | | (45) | |
Total | | $ | (638) | | | $ | (407) | | | Total | | $ | (381) | | | $ | (116) | |
(a)We expect to reclassify approximately $181$267 million of loss associated with cash flow hedge price risk management activities included in our accumulated other comprehensive loss balance as of SeptemberJune 30, 20212022 into earnings during the next twelve months (when the associated forecasted transactions are also expected to impact earnings); however, actual amounts reclassified into earnings could vary materially as a result of changes in market prices.
(b)During the ninesix months ended SeptemberJune 30, 2022 and 2021, we recognized approximate gains of $5 million and $6 million, respectively, associated with a write-down of hedged inventory. All other amounts reclassified were the result of the hedged forecasted transactions actually affecting earnings (i.e., when the forecasted sales and purchases actually occurred).
(c)Amounts represent our share of an equity investee’s accumulated other comprehensive income (loss).
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Derivatives not designated as accounting hedges | | Location | | Gain/(loss) recognized in income on derivatives |
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | | 2021 | | 2020 | | 2021 | | 2020 |
| | | | (In millions) |
Energy commodity derivative contracts | | Revenues—Commodity sales | | $ | (40) | | | $ | 87 | | | $ | (703) | | | $ | 353 | |
| | Costs of sales | | (7) | | | 12 | | | 154 | | | 18 | |
| | Earnings from equity investments | | (2) | | | — | | | (4) | | | — | |
Total(a) | | | | $ | (49) | | | $ | 99 | | | $ | (553) | | | $ | 371 | |
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Derivatives not designated as accounting hedges | | Location | | Gain/(loss) recognized in income on derivatives |
| | | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | | 2022 | | 2021 | | 2022 | | 2021 |
| | | | (In millions) |
Energy commodity derivative contracts | | Revenues—Commodity sales | | $ | (17) | | | $ | (33) | | | $ | (26) | | | $ | (663) | |
| | Costs of sales | | (8) | | | (2) | | | (99) | | | 160 | |
| | Earnings from equity investments | | — | | | (2) | | | (5) | | | (2) | |
Interest rate contracts | | Interest, net | | 12 | | | — | | | 48 | | | — | |
Total(a) | | | | $ | (13) | | | $ | (37) | | | $ | (82) | | | $ | (505) | |
(a)The three and ninesix months ended SeptemberJune 30, 2022 amounts include approximate losses of $38 million and $20 million, respectively, and the three and six months ended June 30, 2021 amounts include approximate losses of $24$7 million and $480 million, respectively, and the three and nine months ended September 30, 2020 amounts include approximate gains of $96 million and $349$455 million, respectively. These gains and losses were associated with natural gas, crude and NGL derivative contract settlements.
Credit Risks
In conjunction with certain derivative contracts, we are required to provide collateral to our counterparties, which may include posting letters of credit or placing cash in margin accounts. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, we had no outstanding letters of credit supporting our commodity price risk management program. As of SeptemberJune 30, 2021,2022, we had cash margins of $165$309 million posted by us with our counterparties as collateral and reported within “Restricted deposits” on our accompanying consolidated balance sheet. As of December 31, 2020,2021, we had cash margins of $3$14 million posted by our counterparties with us as collateral and reported within “Other current liabilities” on our accompanying consolidated balance sheet. The balance at SeptemberJune 30, 20212022 represents the net of our initial margin requirements of $30$184 million and counterparty variation margin requirements of $135 million.$125 million posted by us with our counterparties. We also use industry standard commercial agreements that allow for the netting of exposures associated with transactions executed under a single commercial agreement. Additionally, we generally utilize master netting agreements to offset credit exposure across multiple commercial agreements with a single counterparty.
We also have agreements with certain counterparties to our derivative contracts that contain provisions requiring the posting of additional collateral upon a decrease in our credit rating. As of SeptemberJune 30, 2021,2022, based on our current mark-to-market positions and posted collateral, we estimate that if our credit rating were downgraded one notch, we would not be required to post additional collateral. If we were downgraded two notches, we estimate that we would be required to post $177$358 million of additional collateral.
7.
6. Revenue Recognition
Disaggregation of Revenues
The following tables present our revenues disaggregated by revenue source and type of revenue for each revenue source:
| | | Three Months Ended September 30, 2021 | | Three Months Ended June 30, 2022 |
| | Natural Gas Pipelines | | Products Pipelines | | Terminals | | CO2 | | Corporate and Eliminations | | Total | | Natural Gas Pipelines | | Products Pipelines | | Terminals | | CO2 | | Corporate and Eliminations | | Total |
| | (In millions) | | (In millions) |
Revenues from contracts with customers(a) | | |
Revenues from customers(a) | | Revenues from customers(a) | |
Services | Services | | Services | |
Firm services(b) | Firm services(b) | | $ | 836 | | | $ | 66 | | | $ | 181 | | | $ | 1 | | | $ | (2) | | | $ | 1,082 | | Firm services(b) | | $ | 849 | | | $ | 60 | | | $ | 198 | | | $ | 1 | | | $ | (1) | | | $ | 1,107 | |
Fee-based services | Fee-based services | | 190 | | | 244 | | | 93 | | | 10 | | | — | | | 537 | | Fee-based services | | 234 | | | 242 | | | 96 | | | 11 | | | — | | | 583 | |
Total services | Total services | | 1,026 | | | 310 | | | 274 | | | 11 | | | (2) | | | 1,619 | | Total services | | 1,083 | | | 302 | | | 294 | | | 12 | | | (1) | | | 1,690 | |
Commodity sales | Commodity sales | | Commodity sales | |
Natural gas sales | Natural gas sales | | 1,097 | | | — | | | — | | | 7 | | | (3) | | | 1,101 | | Natural gas sales | | 1,810 | | | — | | | — | | | 24 | | | (6) | | | 1,828 | |
Product sales | Product sales | | 372 | | | 247 | | | 8 | | | 279 | | | (11) | | | 895 | | Product sales | | 410 | | | 640 | | | 7 | | | 404 | | | 13 | | | 1,474 | |
| Total commodity sales | Total commodity sales | | 1,469 | | | 247 | | | 8 | | | 286 | | | (14) | | | 1,996 | | Total commodity sales | | 2,220 | | | 640 | | | 7 | | | 428 | | | 7 | | | 3,302 | |
Total revenues from contracts with customers | | 2,495 | | | 557 | | | 282 | | | 297 | | | (16) | | | 3,615 | | |
Total revenues from customers | | Total revenues from customers | | 3,303 | | | 942 | | | 301 | | | 440 | | | 6 | | | 4,992 | |
Other revenues(c) | Other revenues(c) | | Other revenues(c) | |
Leasing services(d) | Leasing services(d) | | 119 | | | 42 | | | 140 | | | 15 | | | — | | | 316 | | Leasing services(d) | | 118 | | | 49 | | | 149 | | | 15 | | | — | | | 331 | |
Derivatives adjustments on commodity sales | Derivatives adjustments on commodity sales | | (71) | | | — | | | — | | | (63) | | | — | | | (134) | | Derivatives adjustments on commodity sales | | (81) | | | — | | | — | | | (121) | | | — | | | (202) | |
Other | Other | | 12 | | | 6 | | | — | | | 8 | | | 1 | | | 27 | | Other | | 16 | | | 5 | | | — | | | 9 | | | — | | | 30 | |
Total other revenues | Total other revenues | | 60 | | | 48 | | | 140 | | | (40) | | | 1 | | | 209 | | Total other revenues | | 53 | | | 54 | | | 149 | | | (97) | | | — | | | 159 | |
Total revenues | Total revenues | | $ | 2,555 | | | $ | 605 | | | $ | 422 | | | $ | 257 | | | $ | (15) | | | $ | 3,824 | | Total revenues | | $ | 3,356 | | | $ | 996 | | | $ | 450 | | | $ | 343 | | | $ | 6 | | | $ | 5,151 | |
|
| | | Three Months Ended September 30, 2020 | | Three Months Ended June 30, 2021 |
| | Natural Gas Pipelines | | Products Pipelines | | Terminals | | CO2 | | Corporate and Eliminations | | Total | | Natural Gas Pipelines | | Products Pipelines | | Terminals | | CO2 | | Corporate and Eliminations | | Total |
| | (In millions) | | (In millions) |
Revenues from contracts with customers(a) | | |
Revenues from customers(a) | | Revenues from customers(a) | |
Services | Services | | Services | |
Firm services(b) | Firm services(b) | | $ | 818 | | | $ | 69 | | | $ | 185 | | | $ | 1 | | | $ | (2) | | | $ | 1,071 | | Firm services(b) | | $ | 799 | | | $ | 66 | | | $ | 198 | | | $ | — | | | $ | — | | | $ | 1,063 | |
Fee-based services | Fee-based services | | 173 | | | 228 | | | 91 | | | 8 | | | 3 | | | 503 | | Fee-based services | | 176 | | | 244 | | | 84 | | | 10 | | | — | | | 514 | |
Total services | Total services | | 991 | | | 297 | | | 276 | | | 9 | | | 1 | | | 1,574 | | Total services | | 975 | | | 310 | | | 282 | | | 10 | | | — | | | 1,577 | |
Commodity sales | Commodity sales | | Commodity sales | |
Natural gas sales | Natural gas sales | | 507 | | | — | | | — | | | 1 | | | (2) | | | 506 | | Natural gas sales | | 674 | | | — | | | — | | | 1 | | | (3) | | | 672 | |
Product sales | Product sales | | 158 | | | 97 | | | 5 | | | 180 | | | (5) | | | 435 | | Product sales | | 248 | | | 157 | | | 7 | | | 258 | | | (13) | | | 657 | |
| Total commodity sales | Total commodity sales | | 665 | | | 97 | | | 5 | | | 181 | | | (7) | | | 941 | | Total commodity sales | | 922 | | | 157 | | | 7 | | | 259 | | | (16) | | | 1,329 | |
Total revenues from contracts with customers | | 1,656 | | | 394 | | | 281 | | | 190 | | | (6) | | | 2,515 | | |
Total revenues from customers | | Total revenues from customers | | 1,897 | | | 467 | | | 289 | | | 269 | | | (16) | | | 2,906 | |
Other revenues(c) | Other revenues(c) | | Other revenues(c) | |
Leasing services(d) | Leasing services(d) | | 119 | | | 42 | | | 143 | | | 13 | | | — | | | 317 | | Leasing services(d) | | 118 | | | 43 | | | 144 | | | 15 | | | 1 | | | 321 | |
Derivatives adjustments on commodity sales | Derivatives adjustments on commodity sales | | (6) | | | — | | | — | | | 46 | | | — | | | 40 | | Derivatives adjustments on commodity sales | | (37) | | | (1) | | | — | | | (47) | | | — | | | (85) | |
Other | Other | | 40 | | | 6 | | | — | | | 2 | | | (1) | | | 47 | | Other | | (2) | | | 5 | | | — | | | 6 | | | (1) | | | 8 | |
Total other revenues | Total other revenues | | 153 | | | 48 | | | 143 | | | 61 | | | (1) | | | 404 | | Total other revenues | | 79 | | | 47 | | | 144 | | | (26) | | | — | | | 244 | |
Total revenues | Total revenues | | $ | 1,809 | | | $ | 442 | | | $ | 424 | | | $ | 251 | | | $ | (7) | | | $ | 2,919 | | Total revenues | | $ | 1,976 | | | $ | 514 | | | $ | 433 | | | $ | 243 | | | $ | (16) | | | $ | 3,150 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2021 |
| | Natural Gas Pipelines | | Products Pipelines | | Terminals | | CO2 | | Corporate and Eliminations | | Total |
| | (In millions) |
Revenues from contracts with customers(a) | | | | | | | | | | | | |
Services | | | | | | | | | | | | |
Firm services(b) | | $ | 2,501 | | | $ | 191 | | | $ | 570 | | | $ | 1 | | | $ | (2) | | | $ | 3,261 | |
Fee-based services | | 544 | | | 709 | | | 258 | | | 35 | | | — | | | 1,546 | |
Total services | | 3,045 | | | 900 | | | 828 | | | 36 | | | (2) | | | 4,807 | |
Commodity sales | | | | | | | | | | | | |
Natural gas sales | | 5,090 | | | — | | | — | | | 9 | | | (11) | | | 5,088 | |
Product sales | | 840 | | | 529 | | | 20 | | | 766 | | | (34) | | | 2,121 | |
| | | | | | | | | | | | |
Total commodity sales | | 5,930 | | | 529 | | | 20 | | | 775 | | | (45) | | | 7,209 | |
Total revenues from contracts with customers | | 8,975 | | | 1,429 | | | 848 | | | 811 | | | (47) | | | 12,016 | |
Other revenues(c) | | | | | | | | | | | | |
Leasing services(d) | | 356 | | | 128 | | | 427 | | | 42 | | | — | | | 953 | |
Derivatives adjustments on commodity sales | | (726) | | | (1) | | | — | | | (143) | | | — | | | (870) | |
Other | | 51 | | | 16 | | | — | | | 19 | | | — | | | 86 | |
Total other revenues | | (319) | | | 143 | | | 427 | | | (82) | | | — | | | 169 | |
Total revenues | | $ | 8,656 | | | $ | 1,572 | | | $ | 1,275 | | | $ | 729 | | | $ | (47) | | | $ | 12,185 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2022 |
| | Natural Gas Pipelines | | Products Pipelines | | Terminals | | CO2 | | Corporate and Eliminations | | Total |
| | (In millions) |
Revenues from customers(a) | | | | | | | | | | | | |
Services | | | | | | | | | | | | |
Firm services(b) | | $ | 1,788 | | | $ | 119 | | | $ | 386 | | | $ | 1 | | | $ | (2) | | | $ | 2,292 | |
Fee-based services | | 447 | | | 476 | | | 194 | | | 24 | | | — | | | 1,141 | |
Total services | | 2,235 | | | 595 | | | 580 | | | 25 | | | (2) | | | 3,433 | |
Commodity sales | | | | | | | | | | | | |
Natural gas sales | | 3,036 | | | — | | | — | | | 44 | | | (10) | | | 3,070 | |
Product sales | | 752 | | | 1,066 | | | 11 | | | 752 | | | (3) | | | 2,578 | |
| | | | | | | | | | | | |
Total commodity sales | | 3,788 | | | 1,066 | | | 11 | | | 796 | | | (13) | | | 5,648 | |
Total revenues from customers | | 6,023 | | | 1,661 | | | 591 | | | 821 | | | (15) | | | 9,081 | |
Other revenues(c) | | | | | | | | | | | | |
Leasing services(d) | | 235 | | | 93 | | | 289 | | | 28 | | | — | | | 645 | |
Derivatives adjustments on commodity sales | | (120) | | | (3) | | | — | | | (220) | | | — | | | (343) | |
Other | | 31 | | | 11 | | | — | | | 19 | | | — | | | 61 | |
Total other revenues | | 146 | | | 101 | | | 289 | | | (173) | | | — | | | 363 | |
Total revenues | | $ | 6,169 | | | $ | 1,762 | | | $ | 880 | | | $ | 648 | | | $ | (15) | | | $ | 9,444 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2020 |
| | Natural Gas Pipelines | | Products Pipelines | | Terminals | | CO2 | | Corporate and Eliminations | | Total |
| | (In millions) |
Revenues from contracts with customers(a) | | | | | | | | | | | | |
Services | | | | | | | | | | | | |
Firm services(b) | | $ | 2,479 | | | $ | 215 | | | $ | 563 | | | $ | 1 | | | $ | (2) | | | $ | 3,256 | |
Fee-based services | | 523 | | | 670 | | | 307 | | | 31 | | | 1 | | | 1,532 | |
Total services | | 3,002 | | | 885�� | | | 870 | | | 32 | | | (1) | | | 4,788 | |
Commodity sales | | | | | | | | | | | | |
Natural gas sales | | 1,385 | | | — | | | — | | | 1 | | | (5) | | | 1,381 | |
Product sales | | 396 | | | 255 | | | 11 | | | 546 | | | (22) | | | 1,186 | |
| | | | | | | | | | | | |
Total commodity sales | | 1,781 | | | 255 | | | 11 | | | 547 | | | (27) | | | 2,567 | |
Total revenues from contracts with customers | | 4,783 | | | 1,140 | | | 881 | | | 579 | | | (28) | | | 7,355 | |
Other revenues(c) | | | | | | | | | | | | |
Leasing services(d) | | 346 | | | 126 | | | 404 | | | 34 | | | — | | | 910 | |
Derivatives adjustments on commodity sales | | 35 | | | — | | | — | | | 173 | | | — | | | 208 | |
Other | | 91 | | | 16 | | | — | | | 6 | | | (1) | | | 112 | |
Total other revenues | | 472 | | | 142 | | | 404 | | | 213 | | | (1) | | | 1,230 | |
Total revenues | | $ | 5,255 | | | $ | 1,282 | | | $ | 1,285 | | | $ | 792 | | | $ | (29) | | | $ | 8,585 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2021 |
| | Natural Gas Pipelines | | Products Pipelines | | Terminals | | CO2 | | Corporate and Eliminations | | Total |
| | (In millions) |
Revenues from customers(a) | | | | | | | | | | | | |
Services | | | | | | | | | | | | |
Firm services(b) | | $ | 1,665 | | | $ | 125 | | | $ | 389 | | | $ | — | | | $ | — | | | $ | 2,179 | |
Fee-based services | | 354 | | | 465 | | | 165 | | | 25 | | | — | | | 1,009 | |
Total services | | 2,019 | | | 590 | | | 554 | | | 25 | | | — | | | 3,188 | |
Commodity sales | | | | | | | | | | | | |
Natural gas sales | | 3,993 | | | — | | | — | | | 2 | | | (8) | | | 3,987 | |
Product sales | | 468 | | | 282 | | | 12 | | | 487 | | | (23) | | | 1,226 | |
| | | | | | | | | | | | |
Total commodity sales | | 4,461 | | | 282 | | | 12 | | | 489 | | | (31) | | | 5,213 | |
Total revenues from customers | | 6,480 | | | 872 | | | 566 | | | 514 | | | (31) | | | 8,401 | |
Other revenues(c) | | | | | | | | | | | | |
Leasing services(d) | | 237 | | | 86 | | | 287 | | | 27 | | | — | | | 637 | |
Derivatives adjustments on commodity sales | | (655) | | | (1) | | | — | | | (80) | | | — | | | (736) | |
Other | | 39 | | | 10 | | | — | | | 11 | | | (1) | | | 59 | |
Total other revenues | | (379) | | | 95 | | | 287 | | | (42) | | | (1) | | | (40) | |
Total revenues | | $ | 6,101 | | | $ | 967 | | | $ | 853 | | | $ | 472 | | | $ | (32) | | | $ | 8,361 | |
(a)Differences between the revenue classifications presented on the consolidated statements of operations and the categories for the disaggregated revenues by type of revenue above are primarily attributable to revenues reflected in the “Other revenues” category above (see note (c)).
(b)Includes non-cancellable firm service customer contracts with take-or-pay or minimum volume commitment elements, including those contracts where both the price and quantity amount are fixed. Excludes service contracts with index-based pricing, which along with revenues from other customer service contracts are reported as Fee-based“Fee-based services.”
(c)Amounts recognized as revenue under guidance prescribed in Topics of the ASC other than in Topic 606 were primarily from leases and derivative contracts. See Note 65 “Risk Management” for additional information related to our derivative contracts.
(d)Our revenues from leasing services are predominantly comprised of specific assets that we lease to customers under operating leases where one customer obtains substantially all of the economic benefit from the asset and has the right to direct the use of that asset. These leases primarily consist of specific tanks, treating facilities, marine vessels and gas equipment and pipelines with separate control locations. We do not lease assets that qualify as sales-type or finance leases.
Contract Balances
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, our contract asset balances were $62$42 million and $20$39 million, respectively. Of the contract asset balance at December 31, 2020, $142021, $22 million was transferred to accounts receivable during the ninesix months ended SeptemberJune 30, 2021.2022. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, our contract liability balances were $217$215 million and $239$212 million, respectively. Of the contract liability balance at December 31, 2020, $632021, $59 million was recognized as revenue during the ninesix months ended SeptemberJune 30, 2021.2022.
Revenue Allocated to Remaining Performance Obligations
The following table presents our estimated revenue allocated to remaining performance obligations for contracted revenue that has not yet been recognized, representing our “contractually committed” revenue as of SeptemberJune 30, 20212022 that we will invoice or transfer from contract liabilities and recognize in future periods:
| Year | Year | | Estimated Revenue | Year | | Estimated Revenue |
| | (In millions) | | (In millions) |
Three months ended December 31, 2021 | | $ | 1,178 | | |
2022 | | 4,022 | | |
Six months ended December 31, 2022 | | Six months ended December 31, 2022 | | $ | 2,279 | |
2023 | 2023 | | 3,186 | | 2023 | | 3,895 | |
2024 | 2024 | | 2,711 | | 2024 | | 3,173 | |
2025 | 2025 | | 2,277 | | 2025 | | 2,635 | |
2026 | | 2026 | | 2,319 | |
Thereafter | Thereafter | | 14,018 | | Thereafter | 0 | 13,421 | |
Total | Total | | $ | 27,392 | | Total | | $ | 27,722 | |
Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to service or commodity sale customer contracts which have fixed pricing and fixed volume terms and conditions, generally including contracts with take-or-pay or minimum volume commitment payment obligations. Our contractually committed revenue amounts generally exclude, based on the following practical expedient that we elected to apply, remaining performance obligations for contracts with index-based pricing or variable volume attributes in which such variable consideration is allocated entirely to a wholly unsatisfied performance obligation.
8.7. Reportable Segments
Financial information by segment follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions) | | (In millions) |
Revenues | Revenues | | Revenues | |
Natural Gas Pipelines | Natural Gas Pipelines | | Natural Gas Pipelines | |
Revenues from external customers | Revenues from external customers | $ | 2,541 | | | $ | 1,803 | | | $ | 8,611 | | | $ | 5,229 | | Revenues from external customers | $ | 3,363 | | | $ | 1,960 | | | $ | 6,156 | | | $ | 6,070 | |
Intersegment revenues | Intersegment revenues | 14 | | | 6 | | | 45 | | | 26 | | Intersegment revenues | (7) | | | 16 | | | 13 | | | 31 | |
| Products Pipelines | Products Pipelines | 605 | | | 442 | | | 1,572 | | | 1,282 | | Products Pipelines | 996 | | | 514 | | | 1,762 | | | 967 | |
| Terminals | Terminals | | Terminals | |
Revenues from external customers | Revenues from external customers | 421 | | | 423 | | | 1,273 | | | 1,282 | | Revenues from external customers | 449 | | | 433 | | | 878 | | | 852 | |
Intersegment revenues | Intersegment revenues | 1 | | | 1 | | | 2 | | | 3 | | Intersegment revenues | 1 | | | — | | | 2 | | | 1 | |
CO2 | CO2 | 257 | | | 251 | | | 729 | | | 792 | | CO2 | 343 | | | 243 | | | 648 | | | 472 | |
| Corporate and intersegment eliminations | Corporate and intersegment eliminations | (15) | | | (7) | | | (47) | | | (29) | | Corporate and intersegment eliminations | 6 | | | (16) | | | (15) | | | (32) | |
Total consolidated revenues | Total consolidated revenues | $ | 3,824 | | | $ | 2,919 | | | $ | 12,185 | | | $ | 8,585 | | Total consolidated revenues | $ | 5,151 | | | $ | 3,150 | | | $ | 9,444 | | | $ | 8,361 | |
|
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions) | | (In millions) |
Segment EBDA(a) | Segment EBDA(a) | | Segment EBDA(a) | |
Natural Gas Pipelines | Natural Gas Pipelines | $ | 1,069 | | | $ | 1,091 | | | $ | 2,602 | | | $ | 2,284 | | Natural Gas Pipelines | $ | 1,134 | | | $ | (570) | | | $ | 2,318 | | | $ | 1,533 | |
Products Pipelines | Products Pipelines | 279 | | | 223 | | | 792 | | | 719 | | Products Pipelines | 299 | | | 265 | | | 598 | | | 513 | |
Terminals | Terminals | 216 | | | 246 | | | 689 | | | 732 | | Terminals | 253 | | | 246 | | | 491 | | | 473 | |
CO2 | CO2 | 163 | | | 156 | | | 599 | | | (453) | | CO2 | 212 | | | 150 | | | 404 | | | 436 | |
| Total Segment EBDA | Total Segment EBDA | 1,727 | | | 1,716 | | | 4,682 | | | 3,282 | | Total Segment EBDA | 1,898 | | | 91 | | | 3,811 | | | 2,955 | |
DD&A | DD&A | (526) | | | (539) | | | (1,595) | | | (1,636) | | DD&A | (543) | | | (528) | | | (1,081) | | | (1,069) | |
Amortization of excess cost of equity investments | Amortization of excess cost of equity investments | (21) | | | (32) | | | (56) | | | (99) | | Amortization of excess cost of equity investments | (19) | | | (13) | | | (38) | | | (35) | |
| General and administrative and corporate charges | General and administrative and corporate charges | (167) | | | (150) | | | (465) | | | (472) | | General and administrative and corporate charges | (144) | | | (150) | | | (289) | | | (298) | |
Interest, net | Interest, net | (368) | | | (383) | | | (1,122) | | | (1,214) | | Interest, net | (355) | | | (377) | | | (688) | | | (754) | |
| Income tax expense | (134) | | | (140) | | | (248) | | | (304) | | |
Income tax (expense) benefit | | Income tax (expense) benefit | (184) | | | 237 | | | (378) | | | (114) | |
| Total consolidated net income (loss) | Total consolidated net income (loss) | $ | 511 | | | $ | 472 | | | $ | 1,196 | | | $ | (443) | | Total consolidated net income (loss) | $ | 653 | | | $ | (740) | | | $ | 1,337 | | | $ | 685 | |
| | | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| | (In millions) | | (In millions) |
Assets | Assets | | Assets | |
Natural Gas Pipelines | Natural Gas Pipelines | $ | 47,576 | | | $ | 48,597 | | Natural Gas Pipelines | $ | 47,780 | | | $ | 47,746 | |
Products Pipelines | Products Pipelines | 9,118 | | | 9,182 | | Products Pipelines | 9,221 | | | 9,088 | |
Terminals | Terminals | 8,507 | | | 8,639 | | Terminals | 8,428 | | | 8,513 | |
CO2 | CO2 | 2,808 | | | 2,478 | | CO2 | 2,921 | | | 2,843 | |
| Corporate assets(b) | Corporate assets(b) | 1,631 | | | 3,077 | | Corporate assets(b) | 1,040 | | | 2,226 | |
| Total consolidated assets | Total consolidated assets | $ | 69,640 | | | $ | 71,973 | | Total consolidated assets | $ | 69,390 | | | $ | 70,416 | |
(a)Includes revenues, earnings from equity investments, other, net, less operating expenses,(gain) loss on divestitures and impairments, and divestitures,net, other income, net, and other, income, net. Operating expenses include costs of sales, operations and maintenance expenses, and taxes, other than income taxes.
(b)Includes cash and cash equivalents, restricted deposits, certain prepaid assets and deferred charges, including income tax related assets, risk management assets related to derivative contracts, corporate headquarters in Houston, Texas and miscellaneous corporate assets (such as information technology, telecommunications equipment and legacy activity) not allocated to our reportable segments.
9.8. Income Taxes
Income tax expense (benefit) included inon our accompanying consolidated statements of operations is as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions, except percentages) | | (In millions, except percentages) |
Income tax expense | $ | 134 | | | $ | 140 | | | $ | 248 | | | $ | 304 | | |
Income tax expense (benefit) | | Income tax expense (benefit) | $ | 184 | | | $ | (237) | | | $ | 378 | | | $ | 114 | |
Effective tax rate | Effective tax rate | 20.8 | % | | 22.9 | % | | 17.2 | % | | (218.7) | % | Effective tax rate | 22.0 | % | | 24.3 | % | | 22.0 | % | | 14.3 | % |
The effective tax rate for the three and six months ended June 30, 2022 is higher than the statutory federal rate of 21% primarily due to state income taxes, partially offset by dividend-received deductions from our investments in Florida Gas Pipeline (Citrus), NGPL Holdings, and Products (SE) Pipe Line Company (PPL).
The effective tax rate for the three months ended SeptemberJune 30, 2021 is slightly lower than the statutory federal rate of 21% primarily due to dividend-received deductions from our investments in Citrus Corporation (Citrus), NGPL Holdings and Products (SE) Pipe Line Corporation (PPL), partially offset by state income taxes.
The effective tax rates for the three months ended September 30, 2020 is higher than the statutory federal rate of 21% primarily due to state income taxes.
The effective tax rate for the ninesix months ended SeptemberJune 30, 2021 is lower than the statutory federal rate of 21% primarily due to the release of the valuation allowance on our investment in NGPL Holdings upon the sale of a partial interest in NGPL
Holdings, and dividend-received deductions from our investments in Citrus, NGPL Holdings and PPL, partially offset by state income taxes.
The effective tax rate for the nine months ended September 30, 2020 is “negative” and lower than the statutory federal rate of 21% primarily due to the $1,600 million impairment of non-tax deductible goodwill contributing to our loss before income taxes but not providing a tax benefit.This was partially offset by the refund of alternative minimum tax sequestration credits and dividend-received deductions from our investments in Citrus and PPL.
While we would normally expect a federal income tax benefit from our loss before income taxes for the nine months ended September 30, 2020, because a tax benefit is not allowed on the goodwill impairment, we incurred an income tax expense for these periods.
10.9. Litigation and Environmental
We and our subsidiaries are parties to various legal, regulatory and other matters arising from the day-to-day operations of our businesses or certain predecessor operations that may result in claims against the Company. Although no assurance can be given, we believe, based on our experiences to date and taking into account established reserves and insurance, that the ultimate resolution of such items will not have a material adverse impact to our business. We believe we have meritorious defenses to the matters to which we are a party and intend to vigorously defend the Company. When we determine a loss is probable of occurring and is reasonably estimable, we accrue an undiscounted liability for such contingencies based on our best estimate using information available at that time. If the estimated loss is a range of potential outcomes and there is no better estimate within the range, we accrue the amount at the low end of the range. We disclose the following contingencies where an adverse outcome may be material or, in the judgment of management, we conclude the matter should otherwise be disclosed.
SFPPEPNG FERC ProceedingsProceeding
TheOn April 21, 2022, EPNG was notified by the FERC approvedof the SFPP East Line Settlement in Docket No. IS21-138 (“EL Settlement”) on December 31, 2020 andcommencement of a rate proceeding against it became final and effective on February 2, 2021. The EL Settlement resolved certain dockets in their entirety (IS09-437 and OR16-6) and resolved the SFPP East Line related disputes in other dockets which remain ongoing (OR14-35/36 and OR19-21/33/37). The amounts SFPP agreed to pay pursuant to section 5 of the EL Settlement were fully accrued on or before December 31, 2020.
The tariffsNatural Gas Act. This proceeding sets the matter for hearing to determine whether EPNG’s current rates remain just and reasonable. A proceeding under section 5 of the Natural Gas Act is prospective in nature such that a change in rates charged by SFPP which were not fully resolved by the EL Settlement are subject to a number of ongoing shipper-initiated proceedings at the FERC. In general, these complaints and protests allege the rates and tariffs charged by SFPP are not just and reasonable under the Interstate Commerce Act (ICA). In some of these proceedings shippers have challenged the overall rate being charged by SFPP, and in others the shippers have challenged SFPP’s index-based rate increases. The issues involved in these proceedings include, among others, whether indexed rate increases are justified, and the appropriate level of return and income tax allowance SFPP may include in its rates. If the shippers prevail on their arguments or claims, theycustomers, if any, would be entitled to seek reparations for the two-year period preceding the filing date of their complaints and/or prospective refunds in protest cases from the date of protest, and SFPP may be required to reduce its rates going forward. With respect to the ongoing shipper-initiated proceedings atonly occur after the FERC that were not fully resolved by the EL Settlement, the shippers pleaded claims to at least $50 millionhas issued an order. Unless a settlement is reached sooner, an initial Administrative Law Judge decision is anticipated in rate refunds and unspecified rate reductions as of the date of their complaintslate June 2023, with a final FERC decision anticipated in 2014 and 2018. The claims pleaded by the shippers are expected to change due to the passage of time and interest. These proceedings tend to be protracted, with decisions of the FERC often appealed to the federal courts. Management believes SFPP has meritorious arguments supporting SFPP’s rates and intends to vigorously defend SFPP against these complaints and protests.late 2023. We do not believe that the ultimate resolution of the shipper complaints and protests seeking rate reductions or refunds in the ongoing proceedingsthis proceeding will have a material adverse impact onto our business.
Gulf LNG Facility Disputes
On March 1, 2016, Gulf LNG Energy, LLC and Gulf LNG Pipeline, LLC (GLNG) received a Notice of Arbitration from Eni USA Gas Marketing LLC (Eni USA), one of two companies that entered into a terminal use agreement for capacity of the Gulf LNG Facility in Mississippi for an initial term that was not scheduled to expire until the year 2031. Eni USA is an indirect subsidiary of Eni S.p.A., a multi-national integrated energy company headquartered in Milan, Italy. Pursuant to itsThe Notice of Arbitration Eni USA sought declaratory and monetary relief based upon itsEni USA’s assertion that (i) the terminal use agreement should be terminated because changes in the U.S. natural gas market since the execution of the agreement in December 2007 have “frustrated the essential purpose” of the agreement and (ii) activities allegedly undertaken by affiliates of Gulf LNG Holdings Group LLC “in connection with a plan to convert the LNG Facility into a liquefaction/export facility have given rise to a contractual right on the part of Eni USA to terminate” the agreement. On June 29, 2018, the arbitration tribunal delivered an Award that called for the termination of the agreement and Eni USA’s payment of compensation to GLNG. The Award resulted in our recording a net loss in the second quarter of 2018 of our equity investment in GLNG due to a non-cash
impairment of our investment in GLNG partially offset by our share of earnings recognized by GLNG. On February 1, 2019, the Delaware Court of Chancery issued a Final Order and Judgment confirming the Award, which was paid by Eni USA on February 20, 2019.
On September 28, 2018, GLNG filed a lawsuit against Eni S.p.A. in the Supreme Court of the State of New York in New York County to enforce a Guarantee Agreement entered into by Eni S.p.A. in connection with the terminal use agreement. On December 12, 2018,In response to the foregoing lawsuit, Eni S.p.A. filed counterclaims under the terminal use agreement and claims under a counterclaim seekingparent direct agreement with Gulf LNG Energy (Port), LLC. The foregoing claims asserted by Eni S.p.A seek unspecified damages from GLNG. This lawsuit remains pending.
On June 3, 2019,and involve the same allegations as the claims which were resolved conclusively in the arbitrations with Eni USA fileddescribed above and with GLNG’s remaining customer as described below. On January 4, 2022, the trial court entered a second Notice of Arbitration against GLNG asserting the same breach of contract claims that had been asserted in the first arbitration and alleging that GLNG negligently misrepresented certain facts or contentions in the first arbitration.decision granting Eni USA’s second arbitration sought to recover as damages some or all of the payments made by Eni USA to satisfy the Final Order and Judgment of the Court of Chancery. In response, GLNG filed a complaint with the Court of Chancery together with aS.p.A’s motion seeking to permanently enjoin the second arbitration. On cross-appeals from an Order and Final Judgment of the Court of Chancery, the Delaware Supreme Court ruled in favor of GLNGfor summary judgment on November 17, 2020 and a permanent injunction was entered prohibiting Eni USA from pursuing the second arbitration, including the breach of contract and negligent misrepresentation claims therein. On October 4, 2021, the U.S. Supreme Court denied Eni USA’s petition for writ of certiorari. Consequently, Eni USA remains permanently enjoined from pursuing the second arbitration and the claims asserted therein.by GLNG to enforce the Guarantee Agreement. GLNG filed an interlocutory appeal of the decision. Pending resolution of GLNG’s appeal and further proceedings in the trial court, the foregoing counterclaims and other claims asserted by Eni S.p.A under the terminal use agreement and parent direct agreement remain pending in the trial court.
On December 20, 2019, GLNG’s remaining customer, Angola LNG Supply Services LLC (ALSS), a consortium of international oil companies including Eni S.p.A., filed a Notice of Arbitration seeking a declaration that its terminal use agreement should be deemed terminated as of March 1, 2016 on substantially the same terms and conditions as set forth in the arbitration award pertaining to Eni USA. ALSS also sought a declaration on substantially the same allegations asserted previously by Eni USA in arbitration that activities allegedly undertaken by affiliates of Gulf LNG Holdings Group LLC in connection with the pursuit of an LNG liquefaction export project gave rise to a contractual right on the part of ALSS to terminate the agreement. ALSS also sought a monetary award directing GLNG to reimburse ALSS for all reservation charges and operating fees paid by ALSS after December 31, 2016 plus interest. On July 15, 2021, the arbitration tribunal delivered a Finalan Award on the merits of all claims submitted to the tribunal and denied all of ALSS’s claims with prejudice. On November 23, 2021, the Delaware Court of Chancery issued a Final Order and Judgment confirming the Award.
Continental Resources, Inc. v. Hiland Partners Holdings, LLC
On December 8, 2017, Continental Resources, Inc. (CLR) filed an action in Garfield County, Oklahoma state court alleging that Hiland Partners Holdings, LLC (Hiland Partners) breached a Gas Purchase Agreement, dated November 12, 2010, as amended (GPA), by failing to receive and purchase all of CLR’s dedicated gas under the GPA (produced in three North Dakota counties). CLR also alleged fraud, maintaining that Hiland Partners promised the construction of several additional facilities to process the gas without an intention to build the facilities. Hiland Partners denied these allegations, but the parties entered into a settlement agreement in June 2018, under which CLR agreed to release all of its claims in exchange for Hiland Partners’ construction of 10 infrastructure projects by November 1, 2020. CLR has filed an amended petition in which it asserts that Hiland Partners’ failure to construct certain facilities by specific dates nullifies the release contained in the settlement agreement. CLR’s amended petition makesasserts additional claims under both the GPA and a May 8, 2008 gas purchase contract covering additional North Dakota counties, including CLR’s contention that Hiland Partners is not allowed to deduct third-party processing fees from the gas purchase price. CLR seeks damages in excess of $276 million. Hiland Partners deniesWe deny and willare vigorously defenddefending against these claims.
Freeport LNG Winter Storm Litigation
On September 13, 2021, Freeport LNG Marketing, LLC (Freeport) filed suit against Kinder Morgan Texas Pipeline LLC and Kinder Morgan Tejas Pipeline LLC in the 133rd District Court of Harris County, Texas (Case No. 2021-58787) alleging that defendants breached the parties’ base contract for sale and purchase of natural gas by failing to repurchase natural gas nominated by Freeport between February 10-22, 2021 during Winter Storm Uri. We deny that we were obligated to repurchase natural gas from Freeport given our declaration of force majeure during the storm and our compliance with emergency orders issued by the Railroad Commission of Texas providing heightened priority for the delivery of gas to human needs customers. Freeport alleges that it is owed approximately $98$104 million, plus attorney fees and interest. We believe that our declaration of force majeure iswas valid and appropriate and intend towe are vigorously defenddefending against Freeport’sthese claims.
Pipeline Integrity and Releases
From time to time, despite our best efforts, our pipelines experience leaks and ruptures. These leaks and ruptures may cause explosions, fire, and damage to the environment, damage to property and/or personal injury or death. In connection with
these incidents, we may be sued for damages caused by an alleged failure to properly mark the locations of our pipelines and/or to properly maintain our pipelines. Depending upon the facts and circumstances of a particular incident, state and federal regulatory authorities may seek civil and/or criminal fines and penalties.
Arizona Line 2000 Rupture
On August 15, 2021, the 30” EPNG Line 2000 natural gas transmission pipeline ruptured in a rural area in Coolidge, Arizona. The failure resulted in a fire which destroyed a home, resulting in two fatalities and one injury. The National Transportation Safety Board is investigating the incident. The impacted pipeline segment is currently out of service.
General
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, our total reserve for legal matters was $192$178 million and $273$231 million, respectively.
Environmental Matters
We and our subsidiaries are subject to environmental cleanup and enforcement actions from time to time. In particular, CERCLA generally imposes joint and several liability for cleanup and enforcement costs on current and predecessor owners and operators of a site, among others, without regard to fault or the legality of the original conduct, subject to the right of a liable party to establish a “reasonable basis” for apportionment of costs. Our operations are also subject to local, state and federal laws and regulations relating to protection of the environment. Although we believe our operations are in substantial compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in pipeline, terminal and CO2 field and oil field operations, and there can be no assurance that we will not incur significant costs and liabilities. Moreover, it is possible that other developments could result in substantial costs and liabilities to us, such as increasingly stringent environmental laws, regulations and enforcement policies under the terms of authority of those laws, and claims for damages to property or persons resulting from our operations.
We are currently involved in several governmental proceedings involving alleged violations of local, state and federal environmental and safety regulations. As we receive notices of non-compliance, we attempt to negotiate and settle such matters where appropriate. These alleged violations may result in fines and penalties, but we do not believe any such fines and penalties will be material to our business, individually or in the aggregate. We are also currently involved in several governmental proceedings involving groundwater and soil remediation efforts under state or federal administrative orders or related remediation programs. We have established a reserve to address the costs associated with the remediation efforts.
In addition, we are involved with and have been identified as a potentially responsible party (PRP) in several federal and state Superfund sites. Environmental reserves have been established for those sites where our contribution is probable and reasonably estimable. In addition, we are from time to time involved in civil proceedings relating to damages alleged to have occurred as a result of accidental leaks or spills of refined petroleum products, crude oil, NGL, natural gas or CO2.
PHMSA Enforcement Matter for KMLT Midwest Terminals
On July 11, 2022, Kinder Morgan Liquid Terminals (KMLT) received a Notice of Probable Violation (NOPV) from PHMSA relating to inspections conducted during 2021 at KMLT’s Cincinnati, Indianapolis, Dayton, Argo, O’Hare, and Wood River Terminals. The NOPV alleges 16 violations of Department of Transportation regulations. The NOPV proposes a penalty of approximately $455,000 and seeks a compliance agreement relating to 3 of the alleged violations. The alleged violations are predominately procedural in nature. We are reviewing the NOPV and have not yet determined which of the allegations we will contest or whether we will pursue an alternative resolution with PHMSA. We do not anticipate the costs to resolve this matter, including any costs to implement a compliance agreement, will have a material adverse impact to our business.
Portland Harbor Superfund Site, Willamette River, Portland, Oregon
On January 6, 2017, the EPA issued a Record of Decision (ROD) that established a final remedy and cleanup plan for an industrialized area on the lower reach of the Willamette River commonly referred to as the Portland Harbor Superfund Site (PHSS). The cost for the final remedy is estimated by the EPA to be more than $3$2.8 billion and active cleanup is expected to take more than 10 years to complete. KMLT, KMBT, and some 90 other PRPs identified by the EPA are involved in a non-judicial allocation process to determine each party’s respective share of the cleanup costs related to the final remedy set forth by the ROD. We are participating in the allocation process on behalf of KMLT (in connection with its ownership or operation of 2 facilities) and KMBT (in connection with its ownership or operation of 2 facilities). Effective January 31, 2020, KMLT entered into separate Administrative Settlement Agreements and Orders on Consent (ASAOC) to complete remedial design for two distinct areas within the PHSS associated with KMLT’s facilities. The ASAOC obligates KMLT to pay a share of the remedial design costs for cleanup activities related to these two areas as required by the ROD. Our share of responsibility for the PHSS costs will not be determined until the ongoing non-judicial allocation process is concluded or a lawsuit is filed that results in a judicial decision allocating responsibility. At this time we anticipate the non-judicial allocation process will be complete in or around October 2023. Until the allocation process is completed, we are unable to reasonably estimate the extent of our liability for the costs related to the design of the proposed remedy and cleanup of the PHSS. Because costs associated with any remedial plan are expected to be spread over at least several years, we do not anticipate that our share of the costs of the remediation will have a material adverse impact to our business.
In addition to CERCLA cleanup costs, we are reviewing and will attempt to settle, if possible, natural resource damage (NRD) claims in the amount of approximately $5 million asserted by state and federal trustees following their natural resource assessment of the PHSS. At this time, we are unable to reasonably estimate the extent of our potential NRD liability.
Uranium Mines in Vicinity of Cameron, Arizona
In the 1950s and 1960s, Rare Metals Inc., a historical subsidiary of EPNG, mined approximately 20 uranium mines in the vicinity of Cameron, Arizona, many of which are located on the Navajo Indian Reservation. The mining activities were in response to numerous incentives provided to industry by the U.S. to locate and produce domestic sources of uranium to support the Cold War-era nuclear weapons program. In May 2012, EPNG received a general notice letter from the EPA notifying EPNG of the EPA’s investigation of certain sites and its determination that the EPA considers EPNG to be a PRP within the meaning of CERCLA. In August 2013, EPNG and the EPA entered into an Administrative Order on Consent and Scope of Work pursuant to which EPNG is conducting environmental assessments of the mines and the immediate vicinity. On September 3, 2014, EPNG filed a complaint in the U.S. District Court for the District of Arizona seeking cost recovery and contribution from the applicable federal government agencies toward the cost of environmental activities associated with the mines. The U.S. District Court issued an order on April 16, 2019 that allocated 35% of past and future response costs to the U.S. The decision does not provide or establish the scope of a remedial plan with respect to the sites, nor does it establish the total cost for addressing the sites, all of which remain to be determined in subsequent proceedings and adversarial actions, if
necessary, with the EPA. Until such issues are determined, we are unable to reasonably estimate the extent of our potential liability. Because costs associated with any remedial plan approved by the EPA are expected to be spread over at least several years, we do not anticipate that our share of the costs of the remediation will have a material adverse impact to our business.
Lower Passaic River Study Area of the Diamond Alkali Superfund Site, New Jersey
EPEC Polymers, Inc. and EPEC Oil Company Liquidating Trust (collectively EPEC) are identified as PRPs in an administrative action under CERCLA known as the Lower Passaic River Study Area (Site) concerning the lower 17-mile stretch of the Passaic River in New Jersey. EPEC entered into two Administrative Orders on Consent (AOCs) with the EPA which obligate themobligates EPEC to investigate and characterize contamination at the Site. EPEC is part of a joint defense group of approximately 44 cooperating parties which is directing and funding the AOC work required by the EPA. We have established a reserve for the anticipated cost of compliance with these two AOCs. On March 4, 2016, the EPA issued a Record of Decision (ROD) for the lower 8 miles of the Site. At that time the cleanup plan in the ROD was estimated to cost $1.7 billion. The cleanup is expected to take at least six years to complete once it begins. In addition, the EPA and numerous PRPs, including EPEC, engaged in an allocation process for the implementation of the remedy for the lower 8 miles of the Site. That process was completed December 28, 2020 and certain PRPs, including EPEC, are engaged in discussions with the EPA as a result thereof. There remains significant uncertainty as to the implementation and associated costs of the remedy set forth in the lower eight mile ROD. On October 4, 2021, the EPA issued a ROD for the upper 9 miles of the Site. The cleanup plan in the ROD is estimated to cost $440 million. No timeline for the cleanup has been established. Certain PRPs, including EPEC, are engaged in discussions with the EPA concerning the upper nine miles. There remains significant uncertainty as to the implementation and associated costs of the remedy set forth in the upper nine mile ROD. Until the ongoing discussions with the EPA conclude, we are unable to reasonably estimate the extent of our potential liability. We do not anticipate that our share of the costs to resolve this matter, including the costs of any remediation of the Site, will have a material adverse impact to our business.
Louisiana Governmental Coastal Zone Erosion Litigation
Beginning in 2013, several parishes in Louisiana and the City of New Orleans filed separate lawsuits in state district courts in Louisiana against a number of oil and gas companies, including TGP and SNG. In these cases, the parishes and New Orleans, as Plaintiffs, allege that certain of the defendants’ oil and gas exploration, production and transportation operations were conducted in violation of the State and Local Coastal Resources Management Act of 1978, as amended (SLCRMA) and that those operations caused substantial damage to the coastal waters of Louisiana and nearby lands. The Plaintiffs seek, among other relief, unspecified money damages, attorneys’ fees, interest, and payment of costs necessary to restore the affected areas. There are more than 40 of these cases pending in Louisiana against oil and gas companies, 1 of which is against TGP and 1 of which is against SNG, both described further below.
On November 8, 2013, the Parish of Plaquemines, Louisiana filed a petition for damages in the state district court for Plaquemines Parish, Louisiana against TGP and 17 other energy companies, alleging that the defendants’ operations in Plaquemines Parish violated SLCRMA and Louisiana law, and caused substantial damage to the coastal waters and nearby lands. Plaquemines Parish seeks, among other relief, unspecified money damages, attorney fees, interest, and payment of costs necessary to restore the allegedly affected areas. In May 2018,December 2013, the case was removed to the U.S. District Court for the Eastern District of Louisiana. In May 2019,April 2015, the U.S. District Court ordered the case to be remanded to the state district court for Plaquemines Parish. The defendants appealed that decision. On August 10, 2020,In May 2018, the Fifth Circuit affirmed remand.The defendants filedcase was removed for a motion for rehearing. On August 5, 2021, the Fifth Circuit remanded the casesecond time to the U.S. District Court. In May 2019, the U.S. District Court ordered the case to be remanded to the state district court. The case is effectively stayed pending the resolution of jurisdictional issues in separate, consolidated cases to which TGP is not a party;
The Parish of Plaquemines, et al. vs. Chevron USA, Inc. et al.
consolidated with The Parish of Cameron, et al. v. BP America Production Company, et al. Those cases were removed to federal court and ordered to be remanded to the state district courts for Plaquemines and Cameron Parishes, respectively. The defendants to those consolidated cases are pursuing an appeal of the remand decisions to the United States Court of Appeals for the Fifth Circuit to determine whether there is federal officer jurisdiction. The case remains effectively stayed pending a ruling by the U.S. District Court onFifth Circuit in the federal officer issue.consolidated case. Until these and other issues are determined, we are not able to reasonably estimate the extent of our potential liability, if any. We will continue to vigorously defend this case.
On March 29, 2019, the City of New Orleans and Orleans Parish (collectively, Orleans) filed a petition for damages in the state district court for Orleans Parish, Louisiana against SNG and 10 other energy companies alleging that the defendants’ operations in Orleans Parish violated the SLCRMA and Louisiana law, and caused substantial damage to the coastal waters and nearby lands. Orleans seeks, among other relief, unspecified money damages, attorney fees, interest, and payment of costs necessary to restore the allegedly affected areas. In April 2019, the case was removed to the U.S. District Court for the Eastern District of Louisiana. In May 2019, Orleans moved to remand the case to the state district court. In January 2020, the U.S. District Court ordered the case to be stayed and administratively closed pending the resolution of issues in a separate case to
which SNG is not a party; Parish of Cameron vs. Auster Oil & Gas, Inc., pending in U.S. District Court for the Western District of Louisiana; after which either party may move to re-open the case. Until these and other issues are determined, we are not able to reasonably estimate the extent of our potential liability, if any. We will continue to vigorously defend this case.
Louisiana Landowner Coastal Erosion LitigationProducts Pipeline Incident, Walnut Creek, California
BeginningOn November 20, 2020, SFPP identified an issue on its Line Section 16 (LS-16) which transports petroleum products in January 2015,California from Concord to San Jose. We shut down the pipeline and notified the appropriate regulatory agencies of a “threatened release” of gasoline. We investigated the issue over the next several private landownersdays and on November 24, 2020, identified a crack in Louisiana, as Plaintiffs, filed separate lawsuits in state district courts in Louisiana againstthe pipeline and notified the regulatory agencies of a number of oil and gas pipeline companies, including 4 cases against TGP, 3 cases against SNG, and 1 case against both TGP and SNG. In these cases, the Plaintiffs allege that the defendants failed to properly maintain pipeline canals and canal banks on their property, which caused the canals to erode and widen and resulted in substantial land loss, including significant damage to the ecology and hydrology“confirmed release.” The damaged section of the pipeline was removed and replaced, and the pipeline resumed operations on November 26, 2020. We reported the estimated volume of gasoline released to be 8.1 Bbl. On December 2, 2020, complaints of gasoline odors were reported along the LS-16 pipeline corridor in Walnut Creek. A unified response was implemented by us along with the EPA, the California Office of Spill Prevention and Response, the California Fire Marshall, and the San Francisco Regional Water Quality Control Board. On December 8, 2020, we reported an updated estimated spill volume of up to 1,000 Bbl.
On October 28, 2021, we were informed by the California Attorney General it was contemplating criminal charges against us asserting the November 2020 discharge of gasoline affected property, and damage to timber and wildlife. The Plaintiffs allege the defendants’ conduct constitutes a breachwaters of the subject rightState of way agreements, is inconsistent with prudent operating practices, violates Louisiana law,California, and that defendants’there was a failure to maintain canalsmake timely notices of this discharge to appropriate state agencies. On December 16, 2021, we entered into a plea agreement with the State of California to resolve misdemeanor charges of the unintentional, non-negligent discharge of gasoline resulting from the release and canal banks constitutes negligencethe claimed failure to provide timely notices of the discharge to appropriate state agencies. Under the plea agreement, SFPP plead no-contest to two misdemeanors and trespass. The plaintiffs seek, among other relief, unspecified money damages, attorney fees, interest,paid approximately $2.5 million in fines, penalties, restitution, environmental improvement project funding, and paymentfor enforcement training in the State of costs necessaryCalifornia, and was placed on informal, unsupervised probation for a term of 18 months.
Since the November 2020 release, we have cooperated fully with federal and state agencies and have worked diligently to return the canals and canal banks to their as-built conditions and restore and remediate the affected property. The Plaintiffs also seekareas. We anticipate civil enforcement actions by federal and state agencies arising from the November 2020 release as well as ongoing monitoring and, where necessary, remediation under the oversight of the San Francisco Regional Water Quality Control Board until site conditions demonstrate no further actions are required. We do not anticipate the costs to resolve those enforcement matters, including the costs to monitor and further remediate the site, will have a declaration that the defendants are obligatedmaterial adverse impact to take steps to maintain canals and canal banks going forward. We will continue to vigorously defend the remaining cases.our business.
General
Although it is not possible to predict the ultimate outcomes, we believe that the resolution of the environmental matters set forth in this note, and other matters to which we and our subsidiaries are a party, will not have a material adverse effect on our business. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, we have accrued a total reserve for environmental liabilities in the amount of $242$235 million and $250$243 million, respectively. In addition, as of both SeptemberJune 30, 20212022 and December 31, 2020,2021, we had a receivable of $12 million recorded for expected cost recoveries that have been deemed probable.
11.10. Recent Accounting Pronouncements
Accounting Standards Updates
Reference Rate Reform (Topic 848)
On March 12, 2020, the FASB issued Accounting Standards Update (ASU)ASU No. 2020-04, “Reference Rate Reform -– Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate.Rate (SOFR). Entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met.
On January 7, 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope.” This ASU clarifies that all derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment (the “Discounting Transition”) are in the scope of ASC 848 and therefore qualify for the available temporary optional
expedients and exceptions. As such, entities that employ derivatives that are the designated hedged item in a hedge relationship where perfect effectiveness is assumed can continue to apply hedge accounting without de-designating the hedging relationship to the extent such derivatives are impacted by the Discounting Transition.
The guidance iswas effective upon issuance and generally can be applied through December 31, 2022. We are currently reviewing the effect of Topic 848 to our financial statements.
ASU No. 2020-06
On August 5, 2020,During the FASB issued ASU No. 2020-06, “Debt - Debtsix months ended June 30, 2022 we amended certain of our existing fixed-to-variable interest rate swap agreements, which were designated as fair value hedges, to transition the variable leg of such agreements from LIBOR to SOFR. These agreements contain a combined notional principal amount of $725 million and convert a portion of our fixed rate debt to variable rates through March 2035. Concurrent with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” This ASU (i) simplifies an issuer’s accounting for convertible instruments by eliminating twothese amendments, we elected certain of the three modelsoptional expedients provided in ASC 470-20 that require separateTopic 848 which allow us to maintain our prior designation of fair value hedge accounting to these agreements. As we continue to amend our interest rate swap agreements to transition from LIBOR to SOFR, we will assess whether such amendments qualify for embedded conversion features; (ii) amends diluted EPS calculations for convertible instruments by requiring the useany of the if-converted method;optional expedients in Topic 848 and, (iii) simplifies the settlement assessment entities are requiredshould they qualify, whether we wish to performelect any such optional expedients. See Note 5“Risk Management—Interest Rate Risk Management” for more information on contracts that can potentially settle in an entity’s own equity by removing certain requirements. ASU No. 2020-06 will be effective for us for the fiscal year beginning January 1, 2022, and earlier adoption is permitted. We are currently reviewing the effect of this ASU to our financial statements.
ASU No. 2021-05
On July 19, 2021, the FASB issued ASU No. 2021-05, “Leases (Topic 842); Lessors - Certain Leases with Variable Lease Payments.” This ASU requires a lessor to classify a lease with entirely or partially variable payments that do not depend on an index orinterest rate as an operating lease if another classification (i.e. sales-type or direct financing) would trigger a day-one loss. ASU No. 2021-05 will be effective for us for the fiscal year beginning January 1, 2022, and earlier adoption is permitted. We are currently reviewing the effect of this ASU to our financial statements.
risk management activities.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General and Basis of Presentation
The following discussion and analysis should be read in conjunction with our accompanying interim consolidated financial statements and related notes included elsewhere in this report, and in conjunction with (i) our consolidated financial statements and related notes in our 20202021 Form 10-K; (ii) our management’s discussion and analysis of financial condition and results of operations included in our 20202021 Form 10-K; (iii) “Information Regarding Forward-Looking Statements” at the beginning of this report and in our 20202021 Form 10-K; and (iv) “Risk Factors” in Part I, Item 1A of our 20202021 Form 10-K.
Long-lived Asset Impairment
During the second quarter 2021 we recognized a non-cash, long-lived asset impairment of $1,600 million related to our South Texas gathering and processing assets within our Natural Gas Pipeline business segment, which was driven by lower expectations regarding the volumes and rates associated with the re-contracting of contracts expiring through 2024.
Stagecoach Acquisition
On July 9, 2021, we completed the acquisition of subsidiaries of Stagecoach Gas Services LLC (Stagecoach), a natural gas pipeline and storage joint venture between Consolidated Edison, Inc. and Crestwood Equity Partners, LP, for approximately $1,228 million, including a preliminary purchase price adjustment for working capital. The Stagecoach assets include 4 natural gas storage facilities with a total FERC-certificated working capacity of 41 Bcf and a network of FERC-regulated natural gas transportation pipelines with multiple interconnects to major interstate natural gas pipelines in the northeast region of the U.S., including TGP. The acquired assets are included in our Natural Gas Pipelines business segment.
Kinetrex Energy Acquisition
On August 20, 2021, we completed the acquisition of Indianapolis-based Kinetrex Energy (Kinetrex) from an affiliate of Parallel49 Equity for $318 million, including a preliminary purchase price adjustment for working capital. Kinetrex is a supplier of liquefied natural gas in the Midwest and a producer and supplier of renewable natural gas (RNG) under long-term contracts to transportation service providers. Kinetrex has a 50% interest in the largest RNG facility in Indiana and we commenced construction on three additional landfill-based RNG facilities in September 2021. The acquired assets are included as part of our new Energy Transition Ventures group within our CO2 business segment.
Sale of an Interest in NGPL Holdings LLC
On March 8, 2021, we and Brookfield Infrastructure Partners L.P. (Brookfield) completed the sale of a combined 25% interest in our joint venture, NGPL Holdings LLC (NGPL Holdings), to a fund controlled by ArcLight Capital Partners, LLC (ArcLight). We received net proceeds of $412 million for our proportionate share of the interests sold which included the transfer of $125 million of our $500 million related party promissory note receivable from NGPL Holdings to ArcLight with quarterly interest payments at 6.75%. We recognized a pre-tax gain of $206 million for our proportionate share, which is included within “Other, net” in our accompanying consolidated statement of operations for the nine months ended September 30, 2021. We and Brookfield now each hold a 37.5% interest in NGPL Holdings.
February 2021 Winter Storm
Our year-to-date earnings reflect impacts of the February 2021 winter storm that affected Texas, which are largely nonrecurring. See “—Segment Earnings Results” below. Some of the transactions executed during the winter storm remain subject to risks, including counterparty financial risk, potential disputed purchases and sales and potential legislative or regulatory action in response to, or litigation arising out of, the unprecedented circumstances of the winter storm, which could adversely affect our future earnings, cash flows and financial condition.
20212022 Dividends and Discretionary Capital
We expect to declare dividends of $1.08$1.11 per share for 2021,2022, a 3% increase from the 20202021 declared dividends of $1.05$1.08 per share. Excluding the recent acquisitions, weWe now expect to invest $0.8$1.9 billion in expansion projects, acquisitions, and contributions to joint ventures or discretionary capital expenditures during 2021.2022.
The expectations for 20212022 discussed above involve risks, uncertainties and assumptions, and are not guarantees of performance. Many of the factors that will determine these expectations are beyond our ability to control or predict, and because of these uncertainties, it is advisable not to put undue reliance on any forward-looking statement.
Results of Operations
Overview
As described in further detail below, our management evaluates our performance primarily using the GAAP financial measures of Segment EBDA (as presented in Note 8, “Reportable7 “Reportable Segments”) and Net income (loss) attributable to Kinder Morgan, Inc., along with the non-GAAP financial measures of Adjusted Earnings and DCF, both in the aggregate and per share for each, Adjusted Segment EBDA, Adjusted EBITDA and Net Debt.
GAAP Financial Measures
The Consolidated Earnings Results for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 present Segment EBDA and Net income (loss) attributable to Kinder Morgan, Inc. which are prepared and presented in accordance with GAAP. Segment EBDA is a useful measure of our operating performance because it measures the operating results of our segments before DD&A and certain expenses that are generally not controllable by our business segment operating managers, such as general and administrative expenses and corporate charges, interest expense, net, and income taxes. Our general and administrative expenses and corporate charges include such items as unallocated employee benefits, insurance, rentals, unallocated litigation and environmental expenses, and shared corporate services including accounting, information technology, human resources and legal services.
Non-GAAP Financial Measures
Our non-GAAP financial measures described below should not be considered alternatives to GAAP Net income (loss) attributable to Kinder Morgan, Inc. or other GAAP measures and have important limitations as analytical tools. Our computations of these non-GAAP financial measures may differ from similarly titled measures used by others. You should not consider these non-GAAP financial measures in isolation or as substitutes for an analysis of our results as reported under GAAP. Management compensates for the limitations of these non-GAAP financial measures by reviewing our comparable GAAP measures, understanding the differences between the measures and taking this information into account in its analysis and its decision making processes.
Certain Items
Certain Items, as adjustments used to calculate our non-GAAP financial measures, are items that are required by GAAP to be reflected in Net income (loss) attributable to Kinder Morgan, Inc., but typically either (i) do not have a cash impact (for example, unsettled commodity hedges and asset impairments), or (ii) by their nature are separately identifiable from our normal business operations and in our view are likely to occur only sporadically (for example, certain legal settlements, enactment of new tax legislation and casualty losses). We also include adjustments related to joint ventures (see “Amounts from Joint Ventures” below and the tables included in “—Consolidated Earnings Results (GAAP)—Certain Items Affecting Consolidated Earnings Results,” “—Non-GAAP Financial Measures—Reconciliation of Net Income (Loss) Attributable to Kinder Morgan,
Inc. (GAAP) to Adjusted EBITDA” and “—Non-GAAP Financial Measures—Supplemental Information” below). In addition, Certain Items are described in more detail in the footnotes to tables included in “—Segment Earnings Results” and “—DD&A, General and Administrative and Corporate Charges, Interest, net, and Noncontrolling Interests” below.
Adjusted Earnings
Adjusted Earnings is calculated by adjusting Net income (loss) attributable to Kinder Morgan, Inc. for Certain Items. Adjusted Earnings is used by us and certain external users of our financial statements to assess the earnings of our business excluding Certain Items as another reflection of our ability to generate earnings. We believe the GAAP measure most directly comparable to Adjusted Earnings is Net income (loss) attributable to Kinder Morgan, Inc. Adjusted Earnings per share uses Adjusted Earnings and applies the same two-class method used in arriving at basic earnings (loss) per share. See “—Non-GAAP Financial Measures—Reconciliation of Net Income (Loss) Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted Earnings to DCF” below.
DCF
DCF is calculated by adjusting Net income (loss) attributable to Kinder Morgan, Inc. for Certain Items (Adjusted Earnings), and further by DD&A and amortization of excess cost of equity investments, income tax expense, cash taxes, sustaining capital expenditures and other items. We also include amounts from joint ventures for income taxes, DD&A and sustaining capital expenditures (see “Amounts from Joint Ventures” below). DCF is a significant performance measure useful to management and external users of our financial statements in evaluating our performance and in measuring and estimating the ability of our assets to generate cash earnings after servicing our debt, paying cash taxes and expending sustaining capital, that could be used for discretionary purposes such as dividends, stock repurchases, retirement of debt, or expansion capital expenditures. DCF should not be used as an alternative to net cash provided by operating activities computed under GAAP. We believe the GAAP measure most directly comparable to DCF is Net income (loss) attributable to Kinder Morgan, Inc. DCF per share is DCF divided by average outstanding shares, including restricted stock awards that participate in dividends. See “—Non-GAAP Financial Measures—Reconciliation of Net Income (Loss) Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted Earnings to DCF” and “—Non-GAAP Financial Measures—Adjusted Segment EBDA to Adjusted EBITDA to DCF” below.
Adjusted Segment EBDA
Adjusted Segment EBDA is calculated by adjusting Segment EBDA for Certain Items attributable to the segment. Adjusted Segment EBDA is used by management in its analysis of segment performance and management of our business. We believe Adjusted Segment EBDA is a useful performance metric because it provides management and external users of our financial statements additional insight into the ability of our segments to generate cash earnings on an ongoing basis. We believe it is useful to investors because it is a measure that management uses to allocate resources to our segments and assess each segment’s performance. We believe the GAAP measure most directly comparable to Adjusted Segment EBDA is Segment EBDA. See “—Consolidated Earnings Results (GAAP)—Certain Items Affecting Consolidated Earnings Results” for a reconciliation of Segment EBDA to Adjusted Segment EBDA by business segment.
Adjusted EBITDA
Adjusted EBITDA is calculated by adjusting EBITDA for Certain Items. We also include amounts from joint ventures for income taxes and DD&A (see “Amounts from Joint Ventures” below). Adjusted EBITDA is used by management and external users, in conjunction with our Net Debt (as described further below), to evaluate certain leverage metrics. Therefore, we believe Adjusted EBITDA is useful to investors. We believe the GAAP measure most directly comparable to Adjusted EBITDA is Net income (loss) attributable to Kinder Morgan, Inc. In prior periods Net income (loss) was considered the comparable GAAP measure and has been updated to Net income (loss) attributable to Kinder Morgan, Inc. for consistency with our other non-GAAP performance measures. See “—Non-GAAP Financial Measures—Adjusted Segment EBDA to Adjusted EBITDA to DCF” and “—Non-GAAP Financial Measures—Reconciliation of Net Income (Loss) Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted EBITDA” below.
Amounts from Joint Ventures
Certain Items, DCF and Adjusted EBITDA reflect amounts from unconsolidated joint ventures and consolidated joint ventures utilizing the same recognition and measurement methods used to record “Earnings from equity investments” and “Noncontrolling interests,” respectively. The calculations of DCF and Adjusted EBITDA related to our unconsolidated and consolidated joint ventures include the same items (DD&A and income tax expense, and for DCF only, also cash taxes and sustaining capital expenditures) with respect to the joint ventures as those included in the calculations of DCF and Adjusted EBITDA for our wholly-owned consolidated subsidiaries. (See “—Non-GAAP Financial Measures—Supplemental Information” below.) Although these amounts related to our unconsolidated joint ventures are included in the calculations of
DCF and Adjusted EBITDA, such inclusion should not be understood to imply that we have control over the operations and resulting revenues, expenses or cash flows of such unconsolidated joint ventures.
Net Debt
Net Debt is calculated, based on amounts as of SeptemberJune 30, 2021,2022, by subtracting the following amounts from our debt balance of $32,824$31,522 million: (i) cash and cash equivalents of $102$100 million; and (ii) debt fair value adjustments of $1,014$412 million; and (iii)excluding the foreign exchange impact on Euro-denominated bonds of $90$(19) million for which we have entered into currency swaps.swaps to convert that debt to U.S. dollars. Net Debt is a non-GAAP financial measure that management believes is useful to investors and other users of our financial information in evaluating our leverage. We believe the most comparable measure to Net Debt is debt net of cash and cash equivalents.
Consolidated Earnings Results (GAAP)
The following tables summarize the key components of our consolidated earnings results.
| | | Three Months Ended September 30, | | | | Three Months Ended June 30, | | |
| | 2021 | | 2020 | | Earnings increase/(decrease) | | 2022 | | 2021 | | Earnings increase/(decrease) |
| | (In millions, except percentages) | | (In millions, except percentages) |
Segment EBDA(a) | Segment EBDA(a) | | Segment EBDA(a) | |
Natural Gas Pipelines | Natural Gas Pipelines | $ | 1,069 | | | $ | 1,091 | | | $ | (22) | | | (2) | % | Natural Gas Pipelines | $ | 1,134 | | $ | (570) | | $ | 1,704 | | 299% |
Products Pipelines | Products Pipelines | 279 | | | 223 | | | 56 | | | 25 | % | Products Pipelines | 299 | | 265 | | 34 | | 13% |
Terminals | Terminals | 216 | | | 246 | | | (30) | | | (12) | % | Terminals | 253 | | 246 | | 7 | | 3% |
CO2 | CO2 | 163 | | | 156 | | | 7 | | | 4 | % | CO2 | 212 | | 150 | | 62 | | 41% |
| Total Segment EBDA | Total Segment EBDA | 1,727 | | | 1,716 | | | 11 | | | 1 | % | Total Segment EBDA | 1,898 | | 91 | | 1,807 | | 1,986% |
DD&A | DD&A | (526) | | | (539) | | | 13 | | | 2 | % | DD&A | (543) | | (528) | | (15) | | (3)% |
Amortization of excess cost of equity investments | Amortization of excess cost of equity investments | (21) | | | (32) | | | 11 | | | 34 | % | Amortization of excess cost of equity investments | (19) | | (13) | | (6) | | (46)% |
| General and administrative and corporate charges | General and administrative and corporate charges | (167) | | | (150) | | | (17) | | | (11) | % | General and administrative and corporate charges | (144) | | (150) | | 6 | | 4% |
| Interest, net | Interest, net | (368) | | | (383) | | | 15 | | | 4 | % | Interest, net | (355) | | (377) | | 22 | | 6% |
Income before income taxes | 645 | | | 612 | | | 33 | | | 5 | % | |
Income tax expense | (134) | | | (140) | | | 6 | | | 4 | % | |
Income (loss) before income taxes | | Income (loss) before income taxes | 837 | | (977) | | 1,814 | | 186% |
Income tax (expense) benefit | | Income tax (expense) benefit | (184) | | 237 | | (421) | | (178)% |
| Net income | 511 | | | 472 | | | 39 | | | 8 | % | |
Net income (loss) | | Net income (loss) | 653 | | (740) | | 1,393 | | 188% |
Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | (16) | | | (17) | | | 1 | | | 6 | % | Net income attributable to noncontrolling interests | (18) | | (17) | | (1) | | (6)% |
Net income attributable to Kinder Morgan, Inc. | $ | 495 | | | $ | 455 | | | $ | 40 | | | 9 | % | |
Net income (loss) attributable to Kinder Morgan, Inc. | | Net income (loss) attributable to Kinder Morgan, Inc. | $ | 635 | | $ | (757) | | $ | 1,392 | | 184% |
|
| | | Nine Months Ended September 30, | | | | Six Months Ended June 30, | | |
| | 2021 | | 2020 | | Earnings increase/(decrease) | | 2022 | | 2021 | | Earnings increase/(decrease) |
| | (In millions, except percentages) | | (In millions, except percentages) |
Segment EBDA(a) | Segment EBDA(a) | | Segment EBDA(a) | |
Natural Gas Pipelines | Natural Gas Pipelines | $ | 2,602 | | | $ | 2,284 | | | $ | 318 | | | 14 | % | Natural Gas Pipelines | $ | 2,318 | | | $ | 1,533 | | | $ | 785 | | | 51 | % |
Products Pipelines | Products Pipelines | 792 | | | 719 | | | 73 | | | 10 | % | Products Pipelines | 598 | | | 513 | | | 85 | | | 17 | % |
Terminals | Terminals | 689 | | | 732 | | | (43) | | | (6) | % | Terminals | 491 | | | 473 | | | 18 | | | 4 | % |
CO2 | CO2 | 599 | | | (453) | | | 1,052 | | | 232 | % | CO2 | 404 | | | 436 | | | (32) | | | (7) | % |
| Total Segment EBDA | Total Segment EBDA | 4,682 | | | 3,282 | | | 1,400 | | | 43 | % | Total Segment EBDA | 3,811 | | | 2,955 | | | 856 | | | 29 | % |
DD&A | DD&A | (1,595) | | | (1,636) | | | 41 | | | 3 | % | DD&A | (1,081) | | | (1,069) | | | (12) | | | (1) | % |
Amortization of excess cost of equity investments | Amortization of excess cost of equity investments | (56) | | | (99) | | | 43 | | | 43 | % | Amortization of excess cost of equity investments | (38) | | | (35) | | | (3) | | | (9) | % |
| General and administrative and corporate charges | General and administrative and corporate charges | (465) | | | (472) | | | 7 | | | 1 | % | General and administrative and corporate charges | (289) | | | (298) | | | 9 | | | 3 | % |
| Interest, net | Interest, net | (1,122) | | | (1,214) | | | 92 | | | 8 | % | Interest, net | (688) | | | (754) | | | 66 | | | 9 | % |
Income (loss) before income taxes | 1,444 | | | (139) | | | 1,583 | | | 1,139 | % | |
Income before income taxes | | Income before income taxes | 1,715 | | | 799 | | | 916 | | | 115 | % |
Income tax expense | Income tax expense | (248) | | | (304) | | | 56 | | | 18 | % | Income tax expense | (378) | | | (114) | | | (264) | | | (232) | % |
| Net income (loss) | 1,196 | | | (443) | | | 1,639 | | | 370 | % | |
Net income | | Net income | 1,337 | | | 685 | | | 652 | | | 95 | % |
Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | (49) | | | (45) | | | (4) | | | (9) | % | Net income attributable to noncontrolling interests | (35) | | | (33) | | | (2) | | | (6) | % |
Net income (loss) attributable to Kinder Morgan, Inc. | $ | 1,147 | | | $ | (488) | | | $ | 1,635 | | | 335 | % | |
Net income attributable to Kinder Morgan, Inc. | | Net income attributable to Kinder Morgan, Inc. | $ | 1,302 | | | $ | 652 | | | $ | 650 | | | 100 | % |
|
(a)Includes revenues, earnings from equity investments, and other, net, less operating expenses, (gain) loss on divestitures and impairments, and divestitures,net, other income, net, and other, income, net. Operating expenses include costs of sales, operations and maintenance expenses, and taxes, other than income taxes.
Net income (loss) attributable to Kinder Morgan, Inc. increased $40$1,392 million and $1,635$650 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, as compared to the respective prior year periods. The thirdsecond quarter increase in resultsand year-to-
date increases were impacted by higher earnings from our Products Pipelines business segment, lower interest expense and DD&A expense (including amortization of excess cost of equity investments) partially offset by lower earnings from our Terminals and Natural Gas Pipelines business segments and higher general and administrative and corporate charges expense. The year-to-date increase was primarily impacted by higher earnings from our Natural Gas Pipelines and CO2 business segments primarily relateddue to the February 2021 winter storm and therefore largely nonrecurring, and a decrease of $362 million of impairments in 2021 as compared to 2020 primarily reflecting the $1,600 million pre-tax non-cash asset impairment loss in 2021 related to South Texas gathering and processing assets within our Natural Gas Pipeline segment in 2021 compared to the combined $1,950 million of non-cash impairments recognized in 2020 of goodwill associated with our Natural Gas Pipelines Non-Regulated and CO2 reporting units and non-cash asset impairments of certain oil and gas producing assets in our CO2 business segment. The impacts of the long-lived asset impairments for both periods were partially offset by associated tax benefits. The year-to-date increase was also impacted by higher earnings from our Products Pipelines business segment lower interest expensewith our West Coast Refined Products and DD&A expense (including amortization of excess cost of equity investments)Southeast Refined Products assets. The year-to-date increase was partially offset by lowerthe benefit in the 2021 period of $1,102 million for largely nonrecurring earnings related to the February 2021 winter storm, mostly impacting the earnings from our TerminalsNatural Gas Pipelines and CO2 business segment.segments.
Certain Items Affecting Consolidated Earnings Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | |
| 2021 | | 2020 | | |
| GAAP | | Certain Items | | Adjusted | | GAAP | | Certain Items | | Adjusted | | Adjusted amounts increase/(decrease) to earnings |
| (In millions) |
Segment EBDA | | | | | | | | | | | | | |
Natural Gas Pipelines | $ | 1,069 | | | $ | 21 | | | $ | 1,090 | | | $ | 1,091 | | | $ | (9) | | | $ | 1,082 | | | $ | 8 | |
Products Pipelines | 279 | | | 1 | | | 280 | | | 223 | | | 46 | | | 269 | | | 11 | |
Terminals | 216 | | | 17 | | | 233 | | | 246 | | | — | | | 246 | | | (13) | |
CO2 | 163 | | | (9) | | | 154 | | | 156 | | | (2) | | | 154 | | | — | |
| | | | | | | | | | | | | |
Total Segment EBDA(a) | 1,727 | | | 30 | | | 1,757 | | | 1,716 | | | 35 | | | 1,751 | | | 6 | |
DD&A and amortization of excess cost of equity investments | (547) | | | — | | | (547) | | | (571) | | | — | | | (571) | | | 24 | |
General and administrative and corporate charges(a) | (167) | | | — | | | (167) | | | (150) | | | 11 | | | (139) | | | (28) | |
Interest, net(a) | (368) | | | (8) | | | (376) | | | (383) | | | (8) | | | (391) | | | 15 | |
Income before income taxes | 645 | | | 22 | | | 667 | | | 612 | | | 38 | | | 650 | | | 17 | |
Income tax expense(b) | (134) | | | (12) | | | (146) | | | (140) | | | (8) | | | (148) | | | 2 | |
Net income | 511 | | | 10 | | | 521 | | | 472 | | | 30 | | | 502 | | | 19 | |
Net income attributable to noncontrolling interests(a) | (16) | | | — | | | (16) | | | (17) | | | — | | | (17) | | | 1 | |
| | | | | | | | | | | | | |
Net income attributable to Kinder Morgan, Inc. | $ | 495 | | | $ | 10 | | | $ | 505 | | | $ | 455 | | | $ | 30 | | | $ | 485 | | | $ | 20 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | |
| 2022 | | 2021 | | |
| GAAP | | Certain Items | | Adjusted | | GAAP | | Certain Items | | Adjusted | | Adjusted amounts increase/(decrease) to earnings |
| (In millions) |
Segment EBDA | | | | | | | | | | | | | |
Natural Gas Pipelines | $ | 1,134 | | | $ | (1) | | | $ | 1,133 | | | $ | (570) | | | $ | 1,634 | | | $ | 1,064 | | | $ | 69 | |
Products Pipelines | 299 | | — | | | 299 | | | 265 | | | 28 | | | 293 | | | 6 | |
Terminals | 253 | | | — | | | 253 | | | 246 | | | — | | | 246 | | | 7 | |
CO2 | 212 | | | (1) | | | 211 | | | 150 | | | 1 | | | 151 | | | 60 | |
| | | | | | | | | | | | | |
Total Segment EBDA(a) | 1,898 | | | (2) | | | 1,896 | | | 91 | | | 1,663 | | | 1,754 | | | 142 | |
DD&A and amortization of excess cost of equity investments | (562) | | | — | | | (562) | | | (541) | | | — | | | (541) | | | (21) | |
General and administrative and corporate charges(a) | (144) | | | — | | | (144) | | | (150) | | | — | | | (150) | | | 6 | |
Interest, net(a) | (355) | | | (17) | | | (372) | | | (377) | | | (3) | | | (380) | | | 8 | |
Income (loss) before income taxes | 837 | | | (19) | | | 818 | | | (977) | | | 1,660 | | | 683 | | | 135 | |
Income tax (expense) benefit(b) | (184) | | | 5 | | | (179) | | | 237 | | | (387) | | | (150) | | | (29) | |
Net income (loss) | 653 | | | (14) | | | 639 | | | (740) | | | 1,273 | | | 533 | | | 106 | |
Net income attributable to noncontrolling interests(a) | (18) | | | — | | | (18) | | | (17) | | | — | | | (17) | | | (1) | |
| | | | | | | | | | | | | |
Net income (loss) attributable to Kinder Morgan, Inc. | $ | 635 | | | $ | (14) | | | $ | 621 | | | $ | (757) | | | $ | 1,273 | | | $ | 516 | | | $ | 105 | |
| | | Nine Months Ended September 30, | | | Six Months Ended June 30, | |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| | GAAP | | Certain Items | | Adjusted | | GAAP | | Certain Items | | Adjusted | | Adjusted amounts increase/(decrease) to earnings | | GAAP | | Certain Items | | Adjusted | | GAAP | | Certain Items | | Adjusted | | Adjusted amounts increase/(decrease) to earnings |
| | (In millions) | | (In millions) |
Segment EBDA | Segment EBDA | | Segment EBDA | |
Natural Gas Pipelines | Natural Gas Pipelines | $ | 2,602 | | | $ | 1,646 | | | $ | 4,248 | | | $ | 2,284 | | | $ | 993 | | | $ | 3,277 | | | $ | 971 | | Natural Gas Pipelines | $ | 2,318 | | | $ | 112 | | | $ | 2,430 | | | $ | 1,533 | | | $ | 1,625 | | | $ | 3,158 | | | $ | (728) | |
Products Pipelines | Products Pipelines | 792 | | | 44 | | | 836 | | | 719 | | | 50 | | | 769 | | | 67 | | Products Pipelines | 598 | | | — | | | 598 | | | 513 | | | 43 | | | 556 | | | 42 | |
Terminals | Terminals | 689 | | | 17 | | | 706 | | | 732 | | | — | | | 732 | | | (26) | | Terminals | 491 | | | — | | | 491 | | | 473 | | | — | | | 473 | | | 18 | |
CO2 | CO2 | 599 | | | (3) | | | 596 | | | (453) | | | 938 | | | 485 | | | 111 | | CO2 | 404 | | | 15 | | | 419 | | | 436 | | | 6 | | | 442 | | | (23) | |
| Total Segment EBDA(a) | Total Segment EBDA(a) | 4,682 | | | 1,704 | | | 6,386 | | | 3,282 | | | 1,981 | | | 5,263 | | | 1,123 | | Total Segment EBDA(a) | 3,811 | | | 127 | | | 3,938 | | | 2,955 | | | 1,674 | | | 4,629 | | | (691) | |
DD&A and amortization of excess cost of equity investments | DD&A and amortization of excess cost of equity investments | (1,651) | | | — | | | (1,651) | | | (1,735) | | | — | | | (1,735) | | | 84 | | DD&A and amortization of excess cost of equity investments | (1,119) | | | — | | | (1,119) | | | (1,104) | | | — | | | (1,104) | | | (15) | |
General and administrative and corporate charges(a) | General and administrative and corporate charges(a) | (465) | | | — | | | (465) | | | (472) | | | 36 | | | (436) | | | (29) | | General and administrative and corporate charges(a) | (289) | | | — | | | (289) | | | (298) | | | — | | | (298) | | | 9 | |
Interest, net(a) | Interest, net(a) | (1,122) | | | (17) | | | (1,139) | | | (1,214) | | | (8) | | | (1,222) | | | 83 | | Interest, net(a) | (688) | | | (61) | | | (749) | | | (754) | | | (9) | | | (763) | | | 14 | |
Income (loss) before income taxes | 1,444 | | | 1,687 | | | 3,131 | | | (139) | | | 2,009 | | | 1,870 | | | 1,261 | | |
Income before income taxes | | Income before income taxes | 1,715 | | | 66 | | | 1,781 | | | 799 | | | 1,665 | | | 2,464 | | | (683) | |
Income tax expense(b) | Income tax expense(b) | (248) | | | (439) | | | (687) | | | (304) | | | (114) | | | (418) | | | (269) | | Income tax expense(b) | (378) | | | (15) | | | (393) | | | (114) | | | (427) | | | (541) | | | 148 | |
Net income (loss) | 1,196 | | | 1,248 | | | 2,444 | | | (443) | | | 1,895 | | | 1,452 | | | 992 | | |
Net income | | Net income | 1,337 | | | 51 | | | 1,388 | | | 685 | | | 1,238 | | | 1,923 | | | (535) | |
Net income attributable to noncontrolling interests(a) | Net income attributable to noncontrolling interests(a) | (49) | | | — | | | (49) | | | (45) | | | — | | | (45) | | | (4) | | Net income attributable to noncontrolling interests(a) | (35) | | | — | | | (35) | | | (33) | | | — | | | (33) | | | (2) | |
| Net income (loss) attributable to Kinder Morgan, Inc. | $ | 1,147 | | | $ | 1,248 | | | $ | 2,395 | | | $ | (488) | | | $ | 1,895 | | | $ | 1,407 | | | $ | 988 | | |
Net income attributable to Kinder Morgan, Inc. | | Net income attributable to Kinder Morgan, Inc. | $ | 1,302 | | | $ | 51 | | | $ | 1,353 | | | $ | 652 | | | $ | 1,238 | | | $ | 1,890 | | | $ | (537) | |
(a)For a more detailed discussion of Certain Items, see the footnotes to the tables within “—Segment Earnings Results” and “—DD&A, General and Administrative and Corporate Charges, Interest, net and Noncontrolling Interests” below.
(b)The combined net effect of the income tax Certain Items represents the income tax provision on Certain Items plus discrete income tax items.
Net income (loss) attributable to Kinder Morgan, Inc. adjusted for Certain Items (Adjusted Earnings) increased by $20 million and $988$105 million for the three and nine months ended SeptemberJune 30, 2021, respectively,2022 and decreased by $537 million for the six months ended June 30, 2022 as compared to the respective prior year periods. The thirdsecond quarter increase was primarily due to higher earnings from our Products Pipelines and Natural Gas Pipelines Pipeline and CO2 business segments and lower DD&A expense (including amortization of excess cost of equity investments) and interest expense partially offset by higher general and administrative and corporate charges expense and lower earnings from our Terminals business segment.segments. The year-to-date increasedecrease was impacted by higherlower earnings of $806 million from our Natural Gas Pipelines business segment’s Midstream region and $56 million from our CO2 business segmentssegment’s oil and gas producing activities (both primarily related to the February 2021 winter storm, and therefore largely nonrecurring,nonrecurring) partially offset by lower income tax expense and higher earnings from our Products Pipelines business segment and lower DD&A expense (including amortization of excess cost of equity investments) and interest expense partially offset by higher general and administrative and corporate charges expense and lower earnings from our Terminals business segment.
Non-GAAP Financial Measures
Reconciliation of Net Income (Loss) Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted Earnings to DCF
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions) | | (In millions) |
Net income (loss) attributable to Kinder Morgan, Inc. (GAAP) | Net income (loss) attributable to Kinder Morgan, Inc. (GAAP) | $ | 495 | | | $ | 455 | | | $ | 1,147 | | | $ | (488) | | Net income (loss) attributable to Kinder Morgan, Inc. (GAAP) | $ | 635 | | | $ | (757) | | | $ | 1,302 | | | $ | 652 | |
Total Certain Items | Total Certain Items | 10 | | | 30 | | | 1,248 | | | 1,895 | | Total Certain Items | (14) | | | 1,273 | | | 51 | | | 1,238 | |
Adjusted Earnings(a) | Adjusted Earnings(a) | 505 | | | 485 | | | 2,395 | | | 1,407 | | Adjusted Earnings(a) | 621 | | | 516 | | | 1,353 | | | 1,890 | |
DD&A and amortization of excess cost of equity investments for DCF(b) | DD&A and amortization of excess cost of equity investments for DCF(b) | 612 | | | 662 | | | 1,854 | | | 2,012 | | DD&A and amortization of excess cost of equity investments for DCF(b) | 627 | | | 604 | | | 1,250 | | | 1,242 | |
Income tax expense for DCF(a)(b) | Income tax expense for DCF(a)(b) | 165 | | | 171 | | | 754 | | | 484 | | Income tax expense for DCF(a)(b) | 199 | | | 170 | | | 434 | | | 589 | |
Cash taxes(b) | Cash taxes(b) | (12) | | | (49) | | | (56) | | | (57) | | Cash taxes(b) | (47) | | | (45) | | | (48) | | | (44) | |
Sustaining capital expenditures(b) | Sustaining capital expenditures(b) | (241) | | | (177) | | | (558) | | | (477) | | Sustaining capital expenditures(b) | (213) | | | (210) | | | (338) | | | (317) | |
Other items(c) | Other items(c) | (16) | | | (7) | | | (22) | | | (22) | | Other items(c) | (11) | | | (10) | | | (20) | | | (6) | |
DCF | DCF | $ | 1,013 | | | $ | 1,085 | | | $ | 4,367 | | | $ | 3,347 | | DCF | $ | 1,176 | | | $ | 1,025 | | | $ | 2,631 | | | $ | 3,354 | |
Adjusted Segment EBDA to Adjusted EBITDA to DCF
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions, except per share amounts) | | (In millions, except per share amounts) |
Natural Gas Pipelines | Natural Gas Pipelines | $ | 1,090 | | | $ | 1,082 | | | $ | 4,248 | | | $ | 3,277 | | Natural Gas Pipelines | $ | 1,133 | | | $ | 1,064 | | | $ | 2,430 | | | $ | 3,158 | |
Products Pipelines | Products Pipelines | 280 | | | 269 | | | 836 | | | 769 | | Products Pipelines | 299 | | | 293 | | | 598 | | | 556 | |
Terminals | Terminals | 233 | | | 246 | | | 706 | | | 732 | | Terminals | 253 | | | 246 | | | 491 | | | 473 | |
CO2 | CO2 | 154 | | | 154 | | | 596 | | | 485 | | CO2 | 211 | | | 151 | | | 419 | | | 442 | |
| Adjusted Segment EBDA(a) | Adjusted Segment EBDA(a) | 1,757 | | | 1,751 | | | 6,386 | | | 5,263 | | Adjusted Segment EBDA(a) | 1,896 | | | 1,754 | | | 3,938 | | | 4,629 | |
General and administrative and corporate charges(a) | General and administrative and corporate charges(a) | (167) | | | (139) | | | (465) | | | (436) | | General and administrative and corporate charges(a) | (144) | | | (150) | | | (289) | | | (298) | |
Joint venture DD&A and income tax expense(a)(b) | Joint venture DD&A and income tax expense(a)(b) | 84 | | | 114 | | | 270 | | | 343 | | Joint venture DD&A and income tax expense(a)(b) | 85 | | | 83 | | | 172 | | | 186 | |
Net income attributable to noncontrolling interests(a) | Net income attributable to noncontrolling interests(a) | (16) | | | (17) | | | (49) | | | (45) | | Net income attributable to noncontrolling interests(a) | (18) | | | (17) | | | (35) | | | (33) | |
Adjusted EBITDA | Adjusted EBITDA | 1,658 | | | 1,709 | | | 6,142 | | | 5,125 | | Adjusted EBITDA | 1,819 | | | 1,670 | | | 3,786 | | | 4,484 | |
Interest, net(a) | Interest, net(a) | (376) | | | (391) | | | (1,139) | | | (1,222) | | Interest, net(a) | (372) | | | (380) | | | (749) | | | (763) | |
Cash taxes(b) | Cash taxes(b) | (12) | | | (49) | | | (56) | | | (57) | | Cash taxes(b) | (47) | | | (45) | | | (48) | | | (44) | |
Sustaining capital expenditures(b) | Sustaining capital expenditures(b) | (241) | | | (177) | | | (558) | | | (477) | | Sustaining capital expenditures(b) | (213) | | | (210) | | | (338) | | | (317) | |
| Other items(c) | Other items(c) | (16) | | | (7) | | | (22) | | | (22) | | Other items(c) | (11) | | | (10) | | | (20) | | | (6) | |
DCF | DCF | $ | 1,013 | | | $ | 1,085 | | | $ | 4,367 | | | $ | 3,347 | | DCF | $ | 1,176 | | | $ | 1,025 | | | $ | 2,631 | | | $ | 3,354 | |
| Adjusted Earnings per share | Adjusted Earnings per share | $ | 0.22 | | | $ | 0.21 | | | $ | 1.05 | | | $ | 0.62 | | Adjusted Earnings per share | $ | 0.27 | | | $ | 0.23 | | | $ | 0.59 | | | $ | 0.83 | |
Weighted average shares outstanding for dividends(d) | Weighted average shares outstanding for dividends(d) | 2,279 | | | 2,276 | | | 2,278 | | | 2,276 | | Weighted average shares outstanding for dividends(d) | 2,277 | | | 2,277 | | | 2,279 | | | 2,277 | |
DCF per share | DCF per share | $ | 0.44 | | | $ | 0.48 | | | $ | 1.92 | | | $ | 1.47 | | DCF per share | $ | 0.52 | | | $ | 0.45 | | | $ | 1.15 | | | $ | 1.47 | |
Declared dividends per share | Declared dividends per share | $ | 0.27 | | | $ | 0.2625 | | | $ | 0.81 | | | $ | 0.7875 | | Declared dividends per share | $ | 0.2775 | | | $ | 0.27 | | | $ | 0.555 | | | $ | 0.54 | |
(a)Amounts are adjusted for Certain Items. See tables included in “—Reconciliation of Net Income (Loss) Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted EBITDA” and “—Supplemental Information” below.
(b)Includes or represents DD&A, income tax expense, cash taxes and/or sustaining capital expenditures (as applicable for each item) from joint ventures. See tables included in “—Supplemental Information” below.
(c)Includes pension contributions, non-cash pension expense and non-cash compensation associated with our restricted stock program.
(d)Includes restricted stock awards that participate in dividends.
Reconciliation of Net Income (Loss) Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted EBITDA
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions) | | (In millions) |
Net income (loss) attributable to Kinder Morgan, Inc. (GAAP)(a) | Net income (loss) attributable to Kinder Morgan, Inc. (GAAP)(a) | $ | 495 | | | $ | 455 | | | $ | 1,147 | | | $ | (488) | | Net income (loss) attributable to Kinder Morgan, Inc. (GAAP)(a) | $ | 635 | | | $ | (757) | | | $ | 1,302 | | | $ | 652 | |
Certain Items: | Certain Items: | | Certain Items: | |
Fair value amortization | Fair value amortization | (7) | | | (5) | | | (15) | | | (17) | | Fair value amortization | (3) | | | (4) | | | (7) | | | (8) | |
Legal, environmental and taxes other than income tax reserves | Legal, environmental and taxes other than income tax reserves | — | | | 46 | | | 112 | | | 38 | | Legal, environmental and taxes other than income tax reserves | — | | | 28 | | | — | | | 112 | |
Change in fair value of derivative contracts(b)(a) | Change in fair value of derivative contracts(b)(a) | 22 | | | (6) | | | 64 | | | (10) | | Change in fair value of derivative contracts(b)(a) | (27) | | | 28 | | | 55 | | | 42 | |
Loss on impairments, divestitures and other write-downs, net(c)(b) | Loss on impairments, divestitures and other write-downs, net(c)(b) | 4 | | | 11 | | | 1,515 | | | 382 | | Loss on impairments, divestitures and other write-downs, net(c)(b) | — | | | 1,600 | | | — | | | 1,511 | |
Loss on impairments of goodwill(d) | — | | | — | | | — | | | 1,600 | | |
| COVID-19 costs | — | | | 11 | | | — | | | 11 | | |
| Income tax Certain Items | Income tax Certain Items | (12) | | | (8) | | | (439) | | | (114) | | Income tax Certain Items | 5 | | | (387) | | | (15) | | | (427) | |
| Other | Other | 3 | | | (19) | | | 11 | | | 5 | | Other | 11 | | | 8 | | | 18 | | | 8 | |
Total Certain Items(e)(c) | Total Certain Items(e)(c) | 10 | | | 30 | | | 1,248 | | | 1,895 | | Total Certain Items(e)(c) | (14) | | | 1,273 | | | 51 | | | 1,238 | |
DD&A and amortization of excess cost of equity investments | DD&A and amortization of excess cost of equity investments | 547 | | | 571 | | | 1,651 | | | 1,735 | | DD&A and amortization of excess cost of equity investments | 562 | | | 541 | | | 1,119 | | | 1,104 | |
Income tax expense(f)(d) | Income tax expense(f)(d) | 146 | | | 148 | | | 687 | | | 418 | | Income tax expense(f)(d) | 179 | | | 150 | | | 393 | | | 541 | |
Joint venture DD&A and income tax expense(g)(e) | Joint venture DD&A and income tax expense(g)(e) | 84 | | | 114 | | | 270 | | | 343 | | Joint venture DD&A and income tax expense(g)(e) | 85 | | | 83 | | | 172 | | | 186 | |
Interest, net(f)(d) | Interest, net(f)(d) | 376 | | | 391 | | | 1,139 | | | 1,222 | | Interest, net(f)(d) | 372 | | | 380 | | | 749 | | | 763 | |
| Adjusted EBITDA | Adjusted EBITDA | $ | 1,658 | | | $ | 1,709 | | | $ | 6,142 | | | $ | 5,125 | | Adjusted EBITDA | $ | 1,819 | | | $ | 1,670 | | | $ | 3,786 | | | $ | 4,484 | |
(a)In prior periods, Net income (loss) was considered the comparable GAAP measure and has been updated to Net income (loss) attributable to Kinder Morgan, Inc. for consistency with our other non-GAAP performance measures.
(b)Gains or losses are reflected in our DCF when realized.
(c)(b)Three and ninesix months ended SeptemberJune 30, 2021 amounts include a non-cash impairment of $14 million related to the reclassification of an asset to held for sale within our Terminals business segment, offset partially by a gain of $10 million on the sale of assets within our CO2 business segment. Nine months ended September 30, 2021 amount also includes a pre-tax non-cash impairment loss of $1,600 million related to our South Texas gathering and processing assets within our Natural Gas Pipelines business segment resulting from anticipated lower expectations regarding the volumes and rates associated with re-contracting and a write-down of $117 million, reported within “Earnings from equity investments” on the accompanying consolidated statement of operations, on a long-term subordinated note receivable from an equity investee, Ruby, offset partially bycontract renewals. Six months ended June 30, 2021 amount also includes a pre-tax gain of $206 million reported within “Other, net” on the accompanying consolidated statement of operations, associated with the sale of a partial interest in our equity investment in NGPL Holdings. Nine months ended September 30, 2020 amount includesHoldings LLC, offset partially by a pre-tax non-cash impairment losswrite-down of $350$117 million related to oil and gas producing assets in our CO2 business segment driven by low oil prices and $21 million for asset impairments in our Products Pipelines business segment. Except as otherwise noted above, these amounts areon a long-term subordinated note receivable from an equity investee, Ruby, reported within “Loss on impairments“Other, net” and divestitures, net”“Earnings from equity investments,” respectively, on the accompanying consolidated statement of operations.
(d)(c)NineThree and six months ended SeptemberJune 30, 2020 amount includes non-cash impairments of goodwill of $1,000 million and $600 million associated with our Natural Gas Pipelines Non-Regulated and our CO2 reporting units, respectively.
(e)Three months ended September 30, 2021 and 20202022 amounts include $2 millionno amount and $(4)$5 million, respectively, and ninethree and six months ended SeptemberJune 30, 2021 and 2020 amounts include $129$10 million and $(4)$127 million, respectively, reported within “Earnings from equity investments” on our consolidated statements of operations.
(f)(d)Amounts are adjusted for Certain Items. See tables included in “—Supplemental Information” and “—DD&A, General and Administrative and Corporate Charges, Interest, net, and Noncontrolling Interests” below.
(g)(e)Represents joint venture DD&A and income tax expense. See tables included in “—Supplemental Information” below.
Supplemental Information
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions) | | (In millions) |
DD&A (GAAP) | DD&A (GAAP) | $ | 526 | | | $ | 539 | | | $ | 1,595 | | | $ | 1,636 | | DD&A (GAAP) | $ | 543 | | | $ | 528 | | | $ | 1,081 | | | $ | 1,069 | |
Amortization of excess cost of equity investments (GAAP) | Amortization of excess cost of equity investments (GAAP) | 21 | | | 32 | | | 56 | | | 99 | | Amortization of excess cost of equity investments (GAAP) | 19 | | | 13 | | | 38 | | | 35 | |
DD&A and amortization of excess cost of equity investments | DD&A and amortization of excess cost of equity investments | 547 | | | 571 | | | 1,651 | | | 1,735 | | DD&A and amortization of excess cost of equity investments | 562 | | | 541 | | | 1,119 | | | 1,104 | |
Joint venture DD&A | Joint venture DD&A | 65 | | | 91 | | | 203 | | | 277 | | Joint venture DD&A | 65 | | | 63 | | | 131 | | | 138 | |
| DD&A and amortization of excess cost of equity investments for DCF | DD&A and amortization of excess cost of equity investments for DCF | $ | 612 | | | $ | 662 | | | $ | 1,854 | | | $ | 2,012 | | DD&A and amortization of excess cost of equity investments for DCF | $ | 627 | | | $ | 604 | | | $ | 1,250 | | | $ | 1,242 | |
| Income tax expense (GAAP) | $ | 134 | | | $ | 140 | | | $ | 248 | | | $ | 304 | | |
Income tax expense (benefit) (GAAP) | | Income tax expense (benefit) (GAAP) | $ | 184 | | | $ | (237) | | | $ | 378 | | | $ | 114 | |
Certain Items | Certain Items | 12 | | | 8 | | | 439 | | | 114 | | Certain Items | (5) | | | 387 | | | 15 | | | 427 | |
Income tax expense(a) | Income tax expense(a) | 146 | | | 148 | | | 687 | | | 418 | | Income tax expense(a) | 179 | | | 150 | | | 393 | | | 541 | |
Unconsolidated joint venture income tax expense(a)(b) | Unconsolidated joint venture income tax expense(a)(b) | 19 | | | 23 | | | 67 | | | 66 | | Unconsolidated joint venture income tax expense(a)(b) | 20 | | | 20 | | | 41 | | | 48 | |
| Income tax expense for DCF(a) | Income tax expense for DCF(a) | $ | 165 | | | $ | 171 | | | $ | 754 | | | $ | 484 | | Income tax expense for DCF(a) | $ | 199 | | | $ | 170 | | | $ | 434 | | | $ | 589 | |
| Additional joint venture information | Additional joint venture information | | Additional joint venture information | |
Unconsolidated joint venture DD&A | Unconsolidated joint venture DD&A | $ | 76 | | | $ | 101 | | | $ | 236 | | | $ | 306 | | Unconsolidated joint venture DD&A | $ | 76 | | | $ | 74 | | | $ | 153 | | | $ | 160 | |
Less: Consolidated joint venture partners’ DD&A | Less: Consolidated joint venture partners’ DD&A | 11 | | | 10 | | | 33 | | | 29 | | Less: Consolidated joint venture partners’ DD&A | 11 | | | 11 | | | 22 | | | 22 | |
Joint venture DD&A | Joint venture DD&A | 65 | | | 91 | | | 203 | | | 277 | | Joint venture DD&A | 65 | | | 63 | | | 131 | | | 138 | |
Unconsolidated joint venture income tax expense(a)(b) | Unconsolidated joint venture income tax expense(a)(b) | 19 | | | 23 | | | 67 | | | 66 | | Unconsolidated joint venture income tax expense(a)(b) | 20 | | | 20 | | | 41 | | | 48 | |
Joint venture DD&A and income tax expense(a) | Joint venture DD&A and income tax expense(a) | $ | 84 | | | $ | 114 | | | $ | 270 | | | $ | 343 | | Joint venture DD&A and income tax expense(a) | $ | 85 | | | $ | 83 | | | $ | 172 | | | $ | 186 | |
| Unconsolidated joint venture cash taxes(b) | Unconsolidated joint venture cash taxes(b) | $ | (13) | | | $ | (41) | | | $ | (47) | | | $ | (51) | | Unconsolidated joint venture cash taxes(b) | $ | (39) | | | $ | (34) | | | $ | (39) | | | $ | (34) | |
| Unconsolidated joint venture sustaining capital expenditures | Unconsolidated joint venture sustaining capital expenditures | $ | (29) | | | $ | (32) | | | $ | (81) | | | $ | (84) | | Unconsolidated joint venture sustaining capital expenditures | $ | (39) | | | $ | (32) | | | $ | (51) | | | $ | (52) | |
Less: Consolidated joint venture partners’ sustaining capital expenditures | Less: Consolidated joint venture partners’ sustaining capital expenditures | (2) | | | (2) | | | (5) | | | (4) | | Less: Consolidated joint venture partners’ sustaining capital expenditures | (2) | | | (2) | | | (4) | | | (3) | |
Joint venture sustaining capital expenditures | Joint venture sustaining capital expenditures | $ | (27) | | | $ | (30) | | | $ | (76) | | | $ | (80) | | Joint venture sustaining capital expenditures | $ | (37) | | | $ | (30) | | | $ | (47) | | | $ | (49) | |
(a)Amounts are adjusted for Certain Items.
(b)Amounts are associated with our Citrus, NGPL Holdings and Products (SE) Pipe Line equity investments.
Segment Earnings Results
Natural Gas Pipelines
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions, except operating statistics) | | (In millions, except operating statistics) |
Revenues | Revenues | $ | 2,555 | | | $ | 1,809 | | | $ | 8,656 | | | $ | 5,255 | | Revenues | $ | 3,356 | | | $ | 1,976 | | | $ | 6,169 | | | $ | 6,101 | |
Operating expenses | Operating expenses | (1,634) | | | (878) | | | (4,981) | | | (2,455) | | Operating expenses | (2,374) | | | (1,077) | | | (4,158) | | | (3,347) | |
Loss on impairments and divestitures, net | Loss on impairments and divestitures, net | — | | | (11) | | | (1,599) | | | (1,011) | | Loss on impairments and divestitures, net | — | | | (1,599) | | | — | | | (1,599) | |
Other income | Other income | — | | | — | | | 2 | | | 1 | | Other income | 1 | | | 1 | | | 2 | | | 2 | |
Earnings from equity investments | Earnings from equity investments | 144 | | | 169 | | | 311 | | | 484 | | Earnings from equity investments | 149 | | | 126 | | | 303 | | | 167 | |
| Other, net | Other, net | 4 | | | 2 | | | 213 | | | 10 | | Other, net | 2 | | | 3 | | | 2 | | | 209 | |
Segment EBDA | Segment EBDA | 1,069 | | | 1,091 | | | 2,602 | | | 2,284 | | Segment EBDA | 1,134 | | | (570) | | | 2,318 | | | 1,533 | |
Certain Items(a) | Certain Items(a) | 21 | | | (9) | | | 1,646 | | | 993 | | Certain Items(a) | (1) | | | 1,634 | | | 112 | | | 1,625 | |
Adjusted Segment EBDA | Adjusted Segment EBDA | $ | 1,090 | | | $ | 1,082 | | | $ | 4,248 | | | $ | 3,277 | | Adjusted Segment EBDA | $ | 1,133 | | | $ | 1,064 | | | $ | 2,430 | | | $ | 3,158 | |
| Change from prior period | Change from prior period | Increase/(Decrease) | | Change from prior period | Increase/(Decrease) | |
Adjusted Segment EBDA | Adjusted Segment EBDA | $ | 8 | | | $ | 971 | | | Adjusted Segment EBDA | $ | 69 | | | $ | (728) | | |
| Volumetric data(b) | Volumetric data(b) | | Volumetric data(b) | |
Transport volumes (BBtu/d) | Transport volumes (BBtu/d) | 38,527 | | | 37,475 | | | 38,593 | | | 37,887 | | Transport volumes (BBtu/d) | 37,822 | | | 38,408 | | | 38,771 | | | 38,627 | |
Sales volumes (BBtu/d) | Sales volumes (BBtu/d) | 2,616 | | | 2,382 | | | 2,480 | | | 2,330 | | Sales volumes (BBtu/d) | 2,579 | | | 2,561 | | | 2,547 | | | 2,411 | |
Gathering volumes (BBtu/d) | Gathering volumes (BBtu/d) | 2,808 | | | 2,925 | | | 2,662 | | | 3,109 | | Gathering volumes (BBtu/d) | 2,997 | | | 2,667 | | | 2,908 | | | 2,588 | |
NGLs (MBbl/d) | NGLs (MBbl/d) | 29 | | | 22 | | | 30 | | | 27 | | NGLs (MBbl/d) | 30 | | | 30 | | | 31 | | | 30 | |
Certain Items affecting Segment EBDA
(a)Includes Certain Item amountsThree months ended June 30, 2022 amount includes an increase in revenues of $21$11 million and $1,646a decrease in costs of sales of $1 million, for the three and ninesix months ended SeptemberJune 30, 2021, respectively, and $(9)2022 amount includes a decrease in revenues of $3 million and $993an increase in costs of sales of $86 million for the threerelated to non-cash mark-to-market derivative contracts used to hedge forecasted natural gas and nineNGL sales and purchases. Three and six months ended SeptemberJune 30, 2020, respectively.2022 amounts also include an increase in other operating expenses of $11 million and $18 million, respectively, related to costs associated with a pipeline rupture. Three and ninesix months ended SeptemberJune 30, 2021 amounts include a pre-tax non-cash asset impairment loss of $1,600 million resulting from anticipated lower volumes and rates on contract renewals related to our South Texas gathering and processing assets and decreases in revenues of $14$16 million and $36$22 million, respectively, related to non-cash mark-to-market derivative contracts used to hedge forecasted natural gas and NGL sales. NineSix months ended SeptemberJune 30, 2021 amount also includes a pre-tax non-cash asset impairment lossgain of $1,600$206 million resulting from lower expectations regarding the volumes and rates associated with re-contracting related tothe sale of a partial interest in our South Texas gathering and processing assets,equity investment in NGPL Holdings partially offset by a write-down of $117 million on a long-term subordinated note receivable from an equity investee, Ruby, and an increase in expense of $69 million related to a litigation reserve partially offset by a pre-tax gain of $206 million associated with the sale of a partial interest in our equity investment in NGPL Holdings. Three and nine months ended September 30, 2020 amounts both include an increase in revenues of $(14) million of amortization of regulatory liabilities, largely offset by non-cash amounts related to mark-to-market derivative contracts. Nine months ended September 30, 2020 amount also includes a $1,000 million non-cash goodwill impairment on our Natural Gas Pipelines Non-Regulated reporting unit.reserve.
Other
(b)Joint venture throughput is reported at our ownership share. Volumes for acquired pipelines are included and volumes for assets sold are excluded for all periods presented. Volumes for acquired pipelines are included for all periods presented, however, EBDA contributions from acquisitions are included only for the periods subsequent to their acquisition.
Below are the changes in Adjusted Segment EBDA in the comparable three and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended SeptemberJune 30, 20212022 versus Three Months Ended SeptemberJune 30, 20202021
| | | Adjusted Segment EBDA increase/(decrease) | | Adjusted Segment EBDA |
| | (In millions, except percentages) | | 2022 | | 2021 | | increase/ (decrease) |
East | | East | $ | 599 | | | $ | 539 | | | $ | 60 | |
Midstream | Midstream | $ | 29 | | | 11% | Midstream | 328 | | | 300 | | | 28 | |
East Region | 8 | | | 1% | |
West Region | (29) | | | (11)% | |
West | | West | 206 | | | 225 | | | (19) | |
| Total Natural Gas Pipelines | Total Natural Gas Pipelines | $ | 8 | | | 1 | % | Total Natural Gas Pipelines | $ | 1,133 | | | $ | 1,064 | | | $ | 69 | |
NineSix Months Ended SeptemberJune 30, 20212022 versus NineSix Months Ended SeptemberJune 30, 20202021
| | | Adjusted Segment EBDA increase/(decrease) | | Adjusted Segment EBDA |
| | (In millions, except percentages) | | 2022 | | 2021 | | increase/ (decrease) |
East | | East | $ | 1,251 | | | $ | 1,129 | | | $ | 122 | |
Midstream | Midstream | $ | 998 | | | 123% | Midstream | 712 | | | 1,518 | | | (806) | |
East Region | 25 | | | 1% | |
West Region | (52) | | | (7)% | |
West | | West | 467 | | | 511 | | | (44) | |
| Total Natural Gas Pipelines | Total Natural Gas Pipelines | $ | 971 | | | 30 | % | Total Natural Gas Pipelines | $ | 2,430 | | | $ | 3,158 | | | $ | (728) | |
The changes in Segment EBDA for our Natural Gas Pipelines business segment are further explained by the following discussion of the significant factors driving Adjusted Segment EBDA in the comparable three and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020:2021:
•$2960 million (11%) and $998$122 million (123%) increases, respectively, in Midstream were primarily due to (i) higher equity earnings due to the Permian Highway Pipeline being placed in service in January 2021; (ii) higher sales margins driven by higher commodity prices on our Texas intrastate natural gas pipeline operations; (iii) higher earnings on Kinder Morgan Altamont LLC primarily due to higher commodity prices and volumes; and (iv) higher volumes on our Hiland Midstream assets. The year-to-date increase was also impacted by higher commodity prices as a result of the February 2021 winter storm on our South Texas assets and Texas intrastate natural gas pipeline operations partially offset by the impacts of lower volumes on KinderHawk and certain purchase contract obligations on our Oklahoma assets. Overall Midstream’s revenues increased primarily due to higher commodity prices which was partially offset by corresponding increases in costs of sales;
•$8 million (1%) and $25 million (1%(11%) increases, respectively, in the East Region werewas primarily due to our July 2021 acquisition of the Stagecoach assets partially offset by lowerand increased earnings on Fayetteville Expressfrom Kinder Morgan Louisiana Pipeline, LLC driven by lower revenues resulting from contract expirations.a new customer contract. The year-to-date increase was also impacted by higher earnings from TGP primarily due to weather-driven increases in reservation and park and loantransportation revenues mostly during the first quarteras a result of 2021 and increased earnings from Elba Liquefaction Company, L.L.C. resulting from the liquefaction unitsnew customer contracts partially offset by lower revenues as a result of the Elba Liquefaction project being fully operational as of August 2020;February 2021 winter storm; and
•$2928 million (11%(9%) increase and $806 million (53%) decrease, respectively, in Midstream. The second quarter increase was primarily due to higher NGL sales margins driven by higher prices on our South Texas and Altamont assets and higher volumes on Kinderhawk assets partially offset by lower gas sales margin on our Texas intrastate natural gas pipeline operations due to lower prices. The year-to-date decrease was primarily due to lower sales margins resulting in decreases of $846 million on our Texas intrastate natural gas pipeline operations and $71 million on our South Texas assets largely driven by higher 2021 commodity prices related to the February 2021 winter storm. These decreases were partially offset by higher earnings on our Oklahoma assets from higher 2021 commodity prices on certain purchase contracts as a result of the February 2021 winter storm, higher volumes on Kinderhawk assets, and higher NGL sales margins driven by higher prices on our Altamont asset. Overall, Midstream’s revenues are partially offset by corresponding changes in costs of sales; partially offset by
•$19 million (8%) and $52$44 million (7%(9%) decreases, respectively, in the West Region werewas primarily due to lower earnings from Wyoming Interstate Company, LLC, Colorado Interstate Gas Company, L.L.C. and Cheyenne Plains Gas Pipeline Company, L.L.C. driven by lower revenues due to contract expirations and lower equity earnings from Ruby. The third quarter decrease was also impacted by lower earnings from EPNG driven by lower commodity and park and loan revenues.revenues resulting from a partial pipeline outage, and lower earnings from Colorado Interstate Gas Company, L.L.C. driven by lower revenues due to a rate case settlement.
Products Pipelines
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions, except operating statistics) | | (In millions, except operating statistics) |
Revenues | Revenues | $ | 605 | | | $ | 442 | | | $ | 1,572 | | | $ | 1,282 | | Revenues | $ | 996 | | | $ | 514 | | | $ | 1,762 | | | $ | 967 | |
Operating expenses | Operating expenses | (341) | | | (233) | | | (828) | | | (585) | | Operating expenses | (717) | | | (268) | | | (1,214) | | | (487) | |
Loss on impairments and divestitures, net | — | | | — | | | — | | | (21) | | |
Gain on divestitures and impairments, net | | Gain on divestitures and impairments, net | — | | | — | | | 12 | | | — | |
| Earnings from equity investments | Earnings from equity investments | 15 | | | 14 | | | 48 | | | 42 | | Earnings from equity investments | 20 | | | 19 | | | 38 | | | 33 | |
| Other, net | — | | | — | | | — | | | 1 | | |
| Segment EBDA | Segment EBDA | 279 | | | 223 | | | 792 | | | 719 | | Segment EBDA | 299 | | | 265 | | | 598 | | | 513 | |
Certain Items(a) | Certain Items(a) | 1 | | | 46 | | | 44 | | | 50 | | Certain Items(a) | — | | | 28 | | | — | | | 43 | |
Adjusted Segment EBDA | Adjusted Segment EBDA | $ | 280 | | | $ | 269 | | | $ | 836 | | | $ | 769 | | Adjusted Segment EBDA | $ | 299 | | | $ | 293 | | | $ | 598 | | | $ | 556 | |
| Change from prior period | Change from prior period | Increase/(Decrease) | | Change from prior period | Increase/(Decrease) | |
Adjusted Segment EBDA | Adjusted Segment EBDA | $ | 11 | | | $ | 67 | | | Adjusted Segment EBDA | $ | 6 | | | $ | 42 | | |
| Volumetric data(b) | Volumetric data(b) | | Volumetric data(b) | |
Gasoline(c) | Gasoline(c) | 1,023 | | | 941 | | | 987 | | | 888 | | Gasoline(c) | 1,017 | | | 1,046 | | | 979 | | | 969 | |
Diesel fuel | Diesel fuel | 389 | | | 383 | | | 395 | | | 371 | | Diesel fuel | 372 | | | 418 | | | 371 | | | 398 | |
Jet fuel | Jet fuel | 250 | | | 160 | | | 217 | | | 184 | | Jet fuel | 267 | | | 224 | | | 255 | | | 200 | |
Total refined product volumes | Total refined product volumes | 1,662 | | | 1,484 | | | 1,599 | | | 1,443 | | Total refined product volumes | 1,656 | | | 1,688 | | | 1,605 | | | 1,567 | |
Crude and condensate | Crude and condensate | 491 | | | 530 | | | 503 | | | 570 | | Crude and condensate | 478 | | | 510 | | | 482 | | | 508 | |
Total delivery volumes (MBbl/d) | Total delivery volumes (MBbl/d) | 2,153 | | | 2,014 | | | 2,102 | | | 2,013 | | Total delivery volumes (MBbl/d) | 2,134 | | | 2,198 | | | 2,087 | | | 2,075 | |
Certain Items affecting Segment EBDA
(a)Includes Certain Item amounts of $1 millionThree and $44 million for the three and nine months ended September 30, 2021, respectively, and $46 million and $50 million for the three and nine months ended September 30, 2020, respectively. Ninesix month 2021 amount includes increasesamounts include an increase in expense of $28 million and $15 million related to a litigation reserve andadjustment. Six month 2021 amount also includes an increase in expense of $15 million related to an environmental reserve adjustment, respectively. Three and nine month 2020 amounts both include a $46 million unfavorable rate case reserve adjustment. Nine month 2020 amount also includes a non-cash loss on impairment of our Belton Terminal of $21 million partially offset by a $17 million favorable adjustment for tax reserves, other than income taxes.
Other
(b)Joint venture throughput is reported at our ownership share.
(c)Volumes include ethanol pipeline volumes.
Below are the changes in Adjusted Segment EBDA in the comparable three and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended SeptemberJune 30, 20212022 versus Three Months Ended SeptemberJune 30, 20202021
| | | Adjusted Segment EBDA increase/(decrease) | | Adjusted Segment EBDA |
| | (In millions, except percentages) | | 2022 | | 2021 | | increase/ (decrease) |
Southeast Refined Products | | Southeast Refined Products | $ | 79 | | | $ | 69 | | | $ | 10 | |
West Coast Refined Products | West Coast Refined Products | $ | 17 | | | 15 | % | West Coast Refined Products | 131 | | | 128 | | | 3 | |
Southeast Refined Products | 6 | | | 10 | % | |
Crude and Condensate | Crude and Condensate | (12) | | | (12) | % | Crude and Condensate | 89 | | | 96 | | | (7) | |
| Total Products Pipelines | Total Products Pipelines | $ | 11 | | | 4 | % | Total Products Pipelines | $ | 299 | | | $ | 293 | | | $ | 6 | |
NineSix Months Ended SeptemberJune 30, 20212022 versus NineSix Months Ended SeptemberJune 30, 20202021
| | | Adjusted Segment EBDA increase/(decrease) | | Adjusted Segment EBDA |
| | (In millions, except percentages) | | 2022 | | 2021 | | increase/ (decrease) |
Southeast Refined Products | | Southeast Refined Products | $ | 152 | | | $ | 134 | | | $ | 18 | |
West Coast Refined Products | West Coast Refined Products | $ | 38 | | | 11 | % | West Coast Refined Products | 268 | | | 238 | | | 30 | |
Southeast Refined Products | 39 | | | 25 | % | |
Crude and Condensate | Crude and Condensate | (10) | | | (4) | % | Crude and Condensate | 178 | | | 184 | | | (6) | |
| Total Products Pipelines | Total Products Pipelines | $ | 67 | | | 9 | % | Total Products Pipelines | $ | 598 | | | $ | 556 | | | $ | 42 | |
The changes in Segment EBDA for our Products Pipelines business segment are further explained by the following discussion of the significant factors driving Adjusted Segment EBDA in the comparable three and nine-monthsix-month periods ended September 30, 2021June 20, 2022 and 2020:2021:
•$1710 million (15%(14%) and $38$18 million (11%) increases, respectively, in West Coast Refined Products were primarily due to increased earnings on Pacific (SFPP), and to a lesser extent, on Calnev Pipe Line LLC and West Coast terminals driven by higher revenues from the continued recovery of volumes in 2021 compared to 2020 which was impacted by COVID-19, partially offset by higher operating expense primarily as a result of higher integrity management spending on SFPP;
•$6 million (10%) and $39 million (25%(13%) increases, respectively, in Southeast Refined Products werewas primarily due to South East Terminals resulting from increased revenues fromhigher volumes driven by continued recovery of volumes from 2020. The year-to-date increase was also driven by higher 2021 earnings at our Transmix processing operations primarily due to higher prices and first quarter 2020 unfavorable inventory adjustments, and an increase in equity earnings from Products (SE) Pipe Line primarily due to product net gains resulting from higher prices; volumes; and
•$123 million (12%(2%) and $10$30 million (4%(13%) increases, respectively, in West Coast Refined Products was primarily due to increased earnings driven by higher revenues on Pacific operations (SFPP) resulting from higher jet fuel volumes and West Coast terminals resulting from higher volumes. The year-to-date increase was also impacted by a gain on sale of land at Calnev Pipe Line LLC; partially offset by
•$7 million (7%) and $6 million (3%) decreases, respectively, in Crude and Condensate werewas primarily due to decreasedlower earnings from the BakkenDouble H pipeline resulting from decreased revenues due to lower volumes. Crude assets and KM Condensate Processing Facility (KMCC - Splitter) partially offset by increased earnings from Kinder Morgan Crude & Condensate Pipeline (KMCC). The Bakken Crude assets’ decreased earnings were driven by lower volumes, contracts renewed at lower average rates,also had higher revenues of $401 million and contract expirations partially offset by lower field operating expenses. KMCC - Splitter’s decreased earnings were driven by higher field maintenance expenses. KMCC’s increased earnings were primarily due to higher deficiency revenues and lower field operating expense partially offset by contract expirations. Bakken Crude assets’ and KMCC’s year-to-date changes$623 million, respectively, were also impacted by first quarter 2020 unfavorable inventory valuation adjustments. In addition, increased marketing activities within KMCC have resulted in third quarter and year-to-date increases in revenues with corresponding increases in cost of sales.sales, resulting from increased marketing activities.
Terminals
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions, except operating statistics) | | (In millions, except operating statistics) |
Revenues | Revenues | $ | 422 | | | $ | 424 | | | $ | 1,275 | | | $ | 1,285 | | Revenues | $ | 450 | | | $ | 433 | | | $ | 880 | | | $ | 853 | |
Operating expenses | Operating expenses | (200) | | | (185) | | | (588) | | | (570) | | Operating expenses | (216) | | | (191) | | | (415) | | | (388) | |
Loss on impairments and divestitures, net | (14) | | | — | | | (14) | | | (5) | | |
Gain (loss) on divestitures and impairments, net | | Gain (loss) on divestitures and impairments, net | 12 | | | (1) | | | 9 | | | — | |
Other income | Other income | 4 | | | — | | | 4 | | | — | | Other income | — | | | — | | | 4 | | | — | |
Earnings from equity investments | Earnings from equity investments | 3 | | | 7 | | | 10 | | | 19 | | Earnings from equity investments | 4 | | | 4 | | | 8 | | | 7 | |
Other, net | Other, net | 1 | | | — | | | 2 | | | 3 | | Other, net | 3 | | | 1 | | | 5 | | | 1 | |
Segment EBDA | Segment EBDA | 216 | | | 246 | | | 689 | | | 732 | | Segment EBDA | 253 | | | 246 | | | 491 | | | 473 | |
Certain Items(a) | Certain Items(a) | 17 | | | — | | | 17 | | | — | | Certain Items(a) | — | | | — | | | — | | | — | |
Adjusted Segment EBDA | Adjusted Segment EBDA | $ | 233 | | | $ | 246 | | | $ | 706 | | | $ | 732 | | Adjusted Segment EBDA | $ | 253 | | | $ | 246 | | | $ | 491 | | | $ | 473 | |
| Change from prior period | Change from prior period | Increase/(Decrease) | | Change from prior period | Increase/(Decrease) | |
Adjusted Segment EBDA | Adjusted Segment EBDA | $ | (13) | | | $ | (26) | | | Adjusted Segment EBDA | $ | 7 | | | $ | 18 | | |
| Volumetric data(b)(a) | Volumetric data(b)(a) | | Volumetric data(b)(a) | |
Liquids leasable capacity (MMBbl) | Liquids leasable capacity (MMBbl) | 79.9 | | | 79.6 | | | 79.9 | | | 79.6 | | Liquids leasable capacity (MMBbl) | 78.9 | | | 79.0 | | | 78.9 | | | 79.0 | |
Liquids utilization %(c)(b) | Liquids utilization %(c)(b) | 94.2 | % | | 96.3 | % | | 94.2 | % | | 96.3 | % | Liquids utilization %(c)(b) | 90.8 | % | | 94.1 | % | | 90.8 | % | | 94.1 | % |
Bulk transload tonnage (MMtons) | Bulk transload tonnage (MMtons) | 13.5 | | | 11.3 | | | 38.1 | | | 35.4 | | Bulk transload tonnage (MMtons) | 13.7 | | | 13.6 | | | 26.7 | | | 24.5 | |
Certain Items affecting Segment EBDAOther
(a)Includes Certain Item amounts of $17 millionVolumes for both three and nine months ended September 30, 2021 primarily resulting from a pre-tax non-cash impairment loss of $14 million related to the reclassification of an asset tofacilities divested, idled and/or held for sale.
Other
(b)Volumes for assets soldsale are excluded for all periods presented.
(c)(b)The ratio of our tankage capacity in service to tankage capacity available for service.
For purposes of the following tables and related discussions, the results of operations of our terminals held for sale or divested, including any associated gain or loss on sale, are reclassified for all periods presented from the historical region and included within the All others group. Below are the changes in Adjusted Segment EBDA in the comparable three and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended SeptemberJune 30, 20212022 versus Three Months Ended SeptemberJune 30, 20202021
| | | Adjusted Segment EBDA increase/(decrease) | | Adjusted Segment EBDA |
| | (In millions, except percentages) | | 2022 | | 2021 | | increase/ (decrease) |
Mid Atlantic | | Mid Atlantic | $ | 24 | | | $ | 17 | | | $ | 7 | |
Gulf Liquids | | Gulf Liquids | 75 | | | 72 | | | 3 | |
Gulf Central | | Gulf Central | 35 | | | 33 | | | 2 | |
Northeast | | Northeast | 23 | | | 29 | | | (6) | |
Marine operations | Marine operations | $ | (15) | | | (29) | % | Marine operations | 33 | | | 38 | | | (5) | |
Gulf Central | 5 | | | 19 | % | |
Mid Atlantic | 4 | | | 40 | % | |
Northeast | (2) | | | (7) | % | |
All others (including intrasegment eliminations) | All others (including intrasegment eliminations) | (5) | | | (4) | % | All others (including intrasegment eliminations) | 63 | | | 57 | | | 6 | |
Total Terminals | Total Terminals | $ | (13) | | | (5) | % | Total Terminals | $ | 253 | | | $ | 246 | | | $ | 7 | |
NineSix Months Ended SeptemberJune 30, 20212022 versus NineSix Months Ended SeptemberJune 30, 20202021
| | | Adjusted Segment EBDA increase/(decrease) | | Adjusted Segment EBDA |
| | (In millions, except percentages) | | 2022 | | 2021 | | increase/ (decrease) |
Mid Atlantic | | Mid Atlantic | $ | 47 | | | $ | 32 | | | $ | 15 | |
Gulf Liquids | | Gulf Liquids | 152 | | | 144 | | | 8 | |
Gulf Central | | Gulf Central | 67 | | | 52 | | | 15 | |
Northeast | | Northeast | 45 | | | 55 | | | (10) | |
Marine operations | Marine operations | $ | (39) | | | (25) | % | Marine operations | 71 | | | 80 | | | (9) | |
Gulf Central | (7) | | | (8) | % | |
Mid Atlantic | 8 | | | 21 | % | |
Northeast | 9 | | | 13 | % | |
All others (including intrasegment eliminations) | All others (including intrasegment eliminations) | 3 | | | 1 | % | All others (including intrasegment eliminations) | 109 | | | 110 | | | (1) | |
Total Terminals | Total Terminals | $ | (26) | | | (4) | % | Total Terminals | $ | 491 | | | $ | 473 | | | $ | 18 | |
The changes in Segment EBDA for our Terminals business segment are further explained by the following discussion of the significant factors driving Adjusted Segment EBDA in the comparable three and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020:2021:
•$157 million (29%(41%) and $39$15 million (25%) decreases, respectively, in Marine operations were primarily due to lower fleet utilization and average charter rates;
•$5 million (19%) increase and $7 million (8%) decrease, respectively, in the Gulf Central terminals. The third quarter increase in earnings was primarily due to higher revenues resulting from higher ethanol, petroleum coke, and coal volumes. The year-to-date decrease in earnings was primarily driven by unfavorable petroleum coke volumes due to refinery outages associated with the February 2021 winter storm as well as an increase in property tax expense at Battleground Oil Specialty Terminal Company LLC;
•$4 million (40%) and $8 million (21%(47%) increases, respectively, in the Mid Atlantic terminals werewas primarily due to higher handling rates and coal volumes at our Pier IX facility; and
•$3 million (4%) and $8 million (6%) increases, respectively, in the Gulf Liquids region was primarily due to increased revenues from contractual rate escalations and higher volumes and associated ancillary fees; and
•$2 million (7%(6%) decrease and $9$15 million (13%(29%) increases, respectively, in the Gulf Central terminals was primarily due to higher volumes for petroleum coke handling activities, owing largely to refinery outages in the 2021 period associated with the February 2021 winter storm, increased revenues resulting from contractual rate escalations, and higher coal volumes. The year-to-date increase was also impacted by lower property tax expense at Battleground Oil Specialty Terminal Company LLC; partially offset by,
•$6 million (21%) and $10 million (18%) decreases, respectively, in the Northeast terminals. The year-to-date increaseterminals was primarily driven by increaseddecreased revenues associated with lower utilization and rates on re-contracted tank positions at our Carteret and Perth Amboy facilities; and
•$5 million (13%) and $9 million (11%) decreases, respectively, in Marine operations was primarily due to lower average charter rates partially offset by higher throughput levels and new contracts.fleet utilization.
CO2
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions, except operating statistics) | | (In millions, except operating statistics) |
Revenues | Revenues | $ | 257 | | | $ | 251 | | | $ | 729 | | | $ | 792 | | Revenues | $ | 343 | | | $ | 243 | | | $ | 648 | | | $ | 472 | |
Operating expenses | Operating expenses | (112) | | | (99) | | | (161) | | | (312) | | Operating expenses | (140) | | | (98) | | | (265) | | | (49) | |
Gain (loss) on impairments and divestitures, net | Gain (loss) on impairments and divestitures, net | 11 | | | — | | | 8 | | | (950) | | Gain (loss) on impairments and divestitures, net | — | | | (3) | | | 1 | | | (3) | |
| Earnings from equity investments | Earnings from equity investments | 7 | | | 4 | | | 23 | | | 17 | | Earnings from equity investments | 9 | | | 8 | | | 20 | | | 16 | |
| Segment EBDA | Segment EBDA | 163 | | | 156 | | | 599 | | | (453) | | Segment EBDA | 212 | | | 150 | | | 404 | | | 436 | |
Certain Items(a) | Certain Items(a) | (9) | | | (2) | | | (3) | | | 938 | | Certain Items(a) | (1) | | | 1 | | | 15 | | | 6 | |
Adjusted Segment EBDA | Adjusted Segment EBDA | $ | 154 | | | $ | 154 | | | $ | 596 | | | $ | 485 | | Adjusted Segment EBDA | $ | 211 | | | $ | 151 | | | $ | 419 | | | $ | 442 | |
| Change from prior period | Change from prior period | Increase/(Decrease) | | Change from prior period | Increase/(Decrease) | |
Adjusted Segment EBDA | Adjusted Segment EBDA | $ | — | | | $ | 111 | | | Adjusted Segment EBDA | $ | 60 | | | $ | (23) | | |
| Volumetric data | Volumetric data | | Volumetric data | |
SACROC oil production | SACROC oil production | 20.1 | | | 21.2 | | | 19.9 | | | 22.1 | | SACROC oil production | 19.7 | | | 20.2 | | | 19.5 | | | 19.8 | |
Yates oil production | Yates oil production | 6.5 | | | 6.4 | | | 6.5 | | | 6.7 | | Yates oil production | 6.3 | | | 6.7 | | | 6.6 | | | 6.4 | |
Katz and Goldsmith oil production | Katz and Goldsmith oil production | 2.1 | | | 2.6 | | | 2.3 | | | 2.8 | | Katz and Goldsmith oil production | 1.8 | | | 2.2 | | | 1.8 | | | 2.4 | |
Tall Cotton oil production | Tall Cotton oil production | 1.1 | | | 1.4 | | | 1.0 | | | 1.9 | | Tall Cotton oil production | 1.0 | | | 1.0 | | | 1.0 | | | 1.0 | |
Total oil production, net (MBbl/d)(b) | Total oil production, net (MBbl/d)(b) | 29.8 | | | 31.6 | | | 29.7 | | | 33.5 | | Total oil production, net (MBbl/d)(b) | 28.8 | | | 30.1 | | | 28.9 | | | 29.6 | |
NGL sales volumes, net (MBbl/d)(b) | NGL sales volumes, net (MBbl/d)(b) | 9.7 | | | 9.1 | | | 9.3 | | | 9.4 | | NGL sales volumes, net (MBbl/d)(b) | 9.2 | | | 9.5 | | | 9.3 | | | 9.1 | |
| CO2 sales volumes, net (Bcf/d) | CO2 sales volumes, net (Bcf/d) | 0.4 | | | 0.4 | | | 0.4 | | | 0.5 | | CO2 sales volumes, net (Bcf/d) | 0.4 | | | 0.4 | | | 0.4 | | | 0.4 | |
Realized weighted average oil price ($ per Bbl) | Realized weighted average oil price ($ per Bbl) | $ | 53.03 | | | $ | 54.83 | | | $ | 52.21 | | | $ | 53.28 | | Realized weighted average oil price ($ per Bbl) | $ | 68.92 | | | $ | 52.50 | | | $ | 67.91 | | | $ | 51.79 | |
Realized weighted average NGL price ($ per Bbl) | Realized weighted average NGL price ($ per Bbl) | $ | 28.01 | | | $ | 17.65 | | | $ | 23.73 | | | $ | 17.77 | | Realized weighted average NGL price ($ per Bbl) | $ | 41.86 | | | $ | 22.58 | | | $ | 42.77 | | | $ | 21.42 | |
Certain Items affecting Segment EBDA
(a)Includes Certain Item amounts of $(9)$(1) million and $(3)$15 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, and $(2)$1 million and $938$6 million for the three and ninesix months ended SeptemberJune 30, 2020, respectively. Nine month 2020 amount primarily resulted from a $600 million goodwill impairment on our CO2 reporting unit and2021, respectively, as changes in revenue related to non-cash impairments of $350 million on our oil and gas producing assets.mark-to-market derivative contracts used to hedge forecasted commodity sales.
Other
(b)Net of royalties and outside working interests.
Below are the changes in Adjusted Segment EBDA in the comparable three and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended SeptemberJune 30, 20212022 versus Three Months Ended SeptemberJune 30, 20202021
| | | | | | | | | | | |
| Adjusted Segment EBDA increase/(decrease) |
| (In millions, except percentages) |
Oil and Gas Producing activities | $ | (42) | | | (40) | % |
Source and Transportation activities | 40 | | | 82 | % |
| | | |
Subtotal | (2) | | | (1) | % |
Energy Transition Ventures | 2 | | | n/a |
Total CO2 | $ | — | | | — | % |
| | | | | | | | | | | | | | | | | |
| Adjusted Segment EBDA |
| 2022 | | 2021 | | increase/ (decrease) |
Oil and Gas Producing activities | $ | 136 | | | $ | 99 | | | $ | 37 | |
Source and Transportation activities | 69 | | | 52 | | | 17 | |
| | | | | |
Subtotal | 205 | | | 151 | | | 54 | |
Energy Transition Ventures | 6 | | | — | | | 6 | |
Total CO2 | $ | 211 | | | $ | 151 | | | $ | 60 | |
NineSix Months Ended SeptemberJune 30, 20212022 versus NineSix Months Ended SeptemberJune 30, 20202021
| | | Adjusted Segment EBDA increase/(decrease) | | Adjusted Segment EBDA |
| | (In millions, except percentages) | | 2022 | | 2021 | | increase/ (decrease) |
Oil and Gas Producing activities | Oil and Gas Producing activities | $ | 73 | | | 23 | % | Oil and Gas Producing activities | $ | 278 | | | $ | 334 | | | $ | (56) | |
Source and Transportation activities | Source and Transportation activities | 36 | | | 22 | % | Source and Transportation activities | 131 | | | 108 | | | 23 | |
| Subtotal | Subtotal | 109 | | | 22 | % | Subtotal | 409 | | | 442 | | | (33) | |
Energy Transition Ventures | Energy Transition Ventures | 2 | | | n/a | Energy Transition Ventures | 10 | | | — | | | 10 | |
Total CO2 | Total CO2 | $ | 111 | | | 23 | % | Total CO2 | $ | 419 | | | $ | 442 | | | $ | (23) | |
n/a - not applicable
The changes in Segment EBDA for our CO2 business segment are further explained by the following discussion of the significant factors driving Adjusted Segment EBDA in the comparable three and nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020:2021:
•$4237 million (40%(37%) increase and $56 million (17%) decrease, and $73 million (23%) increase, respectively, in Oil and Gas Producing activities. The thirdsecond quarter decreaseincrease was primarily due to a settlement for a terminated affiliate purchase contract with Source and Transportation activities which increased operating expenses by $38 million and lowerhigher realized crude oil sales revenues of $14 million due to lower volumes and realized prices partially offset by higher realized NGL prices which increased revenues by $12 million.$63 million partially offset by higher operating expenses. The year-to-date increasedecrease was primarily due to lowerhigher operating expenses of $118$172 million mainly driven by athe benefit realized in the 2021 period realized from returning power to the grid by curtailing oil production during the February 2021 winter storm net of the impact of the terminated affiliate contract noted above, andpartially offset by higher realized crude oil and NGL prices which increased revenues by $27 million, partially offset by lower crude oil volumes which decreased revenues by $45 million, driven in part, by the curtailed oil production and by lower realized crude oil prices which decreased revenues by $22approximately $123 million; and
•$4017 million (82%(33%) and $36$23 million (22%(21%) increases, respectively, in Source and Transportation activities primarily due to a settlement for a terminated affiliate sales contract with Oil and Gas Producing activities which resulted in an increase inincreased revenues of $38 million. The year-to-date increase was also impacted by a decrease in revenues of $19 million related to lowerhigher CO2 sales volumes partially offset by an increase in equity earnings of $6 million and lower operating expenses of $5 million.prices.
We believe that our existing hedge contracts in place within our CO2 business segment substantially mitigate commodity price sensitivities in the near-term and to lesser extent over the following few years from price exposure. Below is a summary of our CO2business segment hedges outstanding as of SeptemberJune 30, 2021.2022.
| | | Remaining 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Remaining 2022 | | 2023 | | 2024 | | 2025 | | 2026 |
Crude Oil(a) | Crude Oil(a) | | Crude Oil(a) | |
Price ($ per Bbl) | Price ($ per Bbl) | $ | 50.38 | | | $ | 53.41 | | | $ | 51.70 | | | $ | 50.97 | | | $ | 52.19 | | Price ($ per Bbl) | $ | 61.19 | | | $ | 61.10 | | | $ | 58.88 | | | $ | 59.08 | | | $ | 66.47 | |
Volume (MBbl/d) | Volume (MBbl/d) | 25.70 | | | 17.00 | | | 11.20 | | | 5.90 | | | 2.85 | | Volume (MBbl/d) | 25.20 | | | 19.00 | | | 11.60 | | | 6.75 | | | 2.10 | |
NGLs | NGLs | | NGLs | |
Price ($ per Bbl) | Price ($ per Bbl) | $ | 36.39 | | | $ | 47.76 | | | Price ($ per Bbl) | $ | 55.36 | | | $ | 61.12 | | |
Volume (MBbl/d) | Volume (MBbl/d) | 6.03 | | | 2.56 | | | Volume (MBbl/d) | 4.76 | | | 1.27 | | |
Midland-to-Cushing Basis Spread | Midland-to-Cushing Basis Spread | | Midland-to-Cushing Basis Spread | |
Price ($ per Bbl) | Price ($ per Bbl) | $ | 0.26 | | | $ | 0.59 | | | Price ($ per Bbl) | $ | 0.53 | | | $ | 0.54 | | |
Volume (MBbl/d) | Volume (MBbl/d) | 24.55 | | | 14.00 | | | Volume (MBbl/d) | 23.65 | | | 4.50 | | |
(a)Includes West Texas Intermediate hedges.
DD&A, General and Administrative and Corporate Charges, Interest, net and Noncontrolling Interests
| | | Three Months Ended September 30, | | Earnings increase/(decrease) | | Three Months Ended June 30, | | Earnings increase/(decrease) |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| | (In millions, except percentages) | | (In millions, except percentages) |
DD&A (GAAP) | DD&A (GAAP) | $ | (526) | | | $ | (539) | | | $ | 13 | | | 2 | % | DD&A (GAAP) | $ | (543) | | | $ | (528) | | | $ | (15) | | | (3) | % |
| General and administrative (GAAP) | General and administrative (GAAP) | $ | (174) | | | $ | (153) | | | $ | (21) | | | (14) | % | General and administrative (GAAP) | $ | (152) | | | $ | (160) | | | $ | 8 | | | 5 | % |
Corporate benefit | Corporate benefit | 7 | | | 3 | | | 4 | | | 133 | % | Corporate benefit | 8 | | | 10 | | | (2) | | | (20) | % |
Certain Items(a) | Certain Items(a) | — | | | 11 | | | (11) | | | (100) | % | Certain Items(a) | — | | | — | | | — | | | — | % |
General and administrative and corporate charges(b)(a) | General and administrative and corporate charges(b)(a) | $ | (167) | | | $ | (139) | | | $ | (28) | | | (20) | % | General and administrative and corporate charges(b)(a) | $ | (144) | | | $ | (150) | | | $ | 6 | | | 4 | % |
| Interest, net (GAAP) | Interest, net (GAAP) | $ | (368) | | | $ | (383) | | | $ | 15 | | | 4 | % | Interest, net (GAAP) | $ | (355) | | | $ | (377) | | | $ | 22 | | | 6 | % |
Certain Items(c)(b) | Certain Items(c)(b) | (8) | | | (8) | | | — | | | — | % | Certain Items(c)(b) | (17) | | | (3) | | | (14) | | | (467) | % |
Interest, net(b)(a) | Interest, net(b)(a) | $ | (376) | | | $ | (391) | | | $ | 15 | | | 4 | % | Interest, net(b)(a) | $ | (372) | | | $ | (380) | | | $ | 8 | | | 2 | % |
| | Net income attributable to noncontrolling interests (GAAP) | Net income attributable to noncontrolling interests (GAAP) | $ | (16) | | | $ | (17) | | | $ | 1 | | | 6 | % | Net income attributable to noncontrolling interests (GAAP) | $ | (18) | | | $ | (17) | | | $ | (1) | | | (6) | % |
Certain Items(d)(c) | Certain Items(d)(c) | — | | | — | | | — | | | — | % | Certain Items(d)(c) | — | | | — | | | — | | | — | % |
Net income attributable to noncontrolling interests(b)(a) | Net income attributable to noncontrolling interests(b)(a) | $ | (16) | | | $ | (17) | | | $ | 1 | | | 6 | % | Net income attributable to noncontrolling interests(b)(a) | $ | (18) | | | $ | (17) | | | $ | (1) | | | (6) | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Earnings increase/(decrease) |
| 2021 | | 2020 | |
| (In millions, except percentages) |
DD&A (GAAP) | $ | (1,595) | | | $ | (1,636) | | | $ | 41 | | | 3 | % |
| | | | | | | |
General and administrative (GAAP) | $ | (490) | | | $ | (461) | | | $ | (29) | | | (6) | % |
Corporate benefit (charges) | 25 | | | (11) | | | 36 | | | 327 | % |
Certain Items(a) | — | | | 36 | | | (36) | | | (100) | % |
General and administrative and corporate charges(b) | $ | (465) | | | $ | (436) | | | $ | (29) | | | (7) | % |
| | | | | | | |
Interest, net (GAAP) | $ | (1,122) | | | $ | (1,214) | | | $ | 92 | | | 8 | % |
Certain Items(c) | (17) | | | (8) | | | (9) | | | (113) | % |
Interest, net(b) | $ | (1,139) | | | $ | (1,222) | | | $ | 83 | | | 7 | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net income attributable to noncontrolling interests (GAAP) | $ | (49) | | | $ | (45) | | | $ | (4) | | | (9) | % |
Certain Items(d) | — | | | — | | | — | | | — | % |
Net income attributable to noncontrolling interests(b) | $ | (49) | | | $ | (45) | | | $ | (4) | | | (9) | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Earnings increase/(decrease) |
| 2022 | | 2021 | |
| (In millions, except percentages) |
DD&A (GAAP) | $ | (1,081) | | | $ | (1,069) | | | $ | (12) | | | (1) | % |
| | | | | | | |
General and administrative (GAAP) | $ | (308) | | | $ | (316) | | | $ | 8 | | | 3 | % |
Corporate benefit | 19 | | | 18 | | | 1 | | | 6 | % |
Certain Items | — | | | — | | | — | | | — | % |
General and administrative and corporate charges(a) | $ | (289) | | | $ | (298) | | | $ | 9 | | | 3 | % |
| | | | | | | |
Interest, net (GAAP) | $ | (688) | | | $ | (754) | | | $ | 66 | | | 9 | % |
Certain Items(b) | (61) | | | (9) | | | (52) | | | (578) | % |
Interest, net(a) | $ | (749) | | | $ | (763) | | | $ | 14 | | | 2 | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net income attributable to noncontrolling interests (GAAP) | $ | (35) | | | $ | (33) | | | $ | (2) | | | (6) | % |
Certain Items(c) | — | | | — | | | — | | | — | % |
Net income attributable to noncontrolling interests(a) | $ | (35) | | | $ | (33) | | | $ | (2) | | | (6) | % |
Certain items
(a)Three and nine month 2020 amounts both include an increase in expense of $11 million related to costs incurred associated with COVID-19 mitigation. Nine month 2020 amount also includes an increase in expense of $23 million associated with the non-cash fair value adjustment of and the dividend accrual prior to the sale of our investment in Pembina common stock.
(b)Amounts are adjusted for Certain Items.
(c)(b)Three and ninesix month 20212022 amounts include decreases in interest expense of $7$14 million and $15 million, respectively, related to non-cash debt fair value adjustments associated with acquisitions. Three and nine month 2020 amounts include (i) decreases in interest expense of $5 million and $17 million, respectively, related to non-cash debt fair value adjustments associated with acquisitions and (ii) a decrease in expense of $3 million and an increase in expense of $11$54 million, respectively, related to non-cash mismatches between the change in fair value of interest rate swaps and change in fair value of hedged debt.debt, primarily related to our floating-to-fixed LIBOR interest rate swaps which are not designated as accounting hedges and $3 million and $7 million, respectively, related to non-cash debt fair value adjustments associated with acquisitions. Three and six month 2021 amounts include decreases of $4 million and $8 million, respectively, related to non-cash debt fair value adjustments associated with acquisitions.
(d)(c)Three and nine months ended September 30,six month 2021 and 2020 amounts each include less than $1 million of noncontrolling interests associated with Certain Items.
General and administrative expenses and corporate charges adjusted for Certain Items for the three and ninesix months ended SeptemberJune 30, 20212022 when compared with the respective prior year periods increased $28decreased $6 million and $29$9 million, respectively, primarily due to lowerhigher capitalized costs of $18$12 million and $41$21 million, respectively, reflecting reducedhigher capital spending primarily by our Natural Gas Pipelines business segment, non-recurring cost savings realized in the 2020 period as a result of the global pandemic of $10 million and $17 million, respectively, and higher benefit-related costs of $10 million and $16 million, respectively, partially offset by $12$6 million and $36$11 million, respectively, of cost savings in the 2021 period associated with organizational efficiency efforts,higher labor, travel and lower pension costs of $4 million and $14 million, respectively.legal costs.
In the table above, we report our interest expense as “net,” meaning that we have subtracted interest income and capitalized interest from our total interest expense to arrive at one interest amount. Our consolidated interest expense, net adjusted for Certain Items for the three and ninesix months ended SeptemberJune 30, 20212022 when compared with the respective prior year periods decreased $15$8 million and $83$14 million, respectively, primarily due to lower long-term debt balances, lower LIBORaverage interest rates and lower long-term interest rates,debt balances, partially offset by lower capitalized interest.higher short-term rates.
We use interest rate swap agreements to convert a portion of the underlying cash flows related to our long-term fixed rate debt securities (senior notes) into variable rate debt in order to achieve our desired mix of fixed and variable rate debt. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, approximately 15%9% and 16%21%, respectively, of the principal amount of our debt balances were subject to variable interest rates—either as short-term or long-term variable rate debt obligations or as fixed-rate debt converted to variable rates through the use of interest rate swaps. The percentage at September 30, 2021 includes our variable-to-fixed interest rate derivative contracts not designated as hedging instruments which hedge our exposure through 2021. For more information on our interest rate swaps, see Note 6 5 “Risk Management—“Risk Management—Interest Rate Risk Management”Management” to our consolidated financial statements.
Net income attributable to noncontrolling interests represents the allocation of our consolidated net income attributable to all outstanding ownership interests in our consolidated subsidiaries that are not owned by us.
Income Taxes
Our tax expense for the three months ended SeptemberJune 30, 20212022 was approximately $134$184 million as compared with $140$237 million of expensetax benefit for the same period of 2020.2021. The $6$421 million decreaseincrease in tax expense wasis due primarily to a slightly lower 2021 effective tax rate caused by multiple factors.federal and state taxes on higher pre-tax book income in the current year.
Our tax expense for the ninesix months ended SeptemberJune 30, 20212022 was approximately $248$378 million as compared with $304$114 million of expense for the same period of 2020.2021. The $56$264 million decreaseincrease in tax expense was due primarily to (i) the prior year disallowance of a tax benefit for the non-tax deductible goodwill impairment, (ii)federal and state taxes on higher dividend-received deductionspre-tax book income in 2021, and (iii) the current year and the release of the valuation allowance on our investment in NGPL Holdings partially offset by federal and state taxes on higher pre-tax book income in 2021 and the refund of alternative minimum tax sequestration credits in 2020.prior year.
Liquidity and Capital Resources
General
As of SeptemberJune 30, 2021,2022, we had $102$100 million of “Cash and cash equivalents,” a decrease of $1,082$1,040 million from December 31, 2020. We used $1.2 billion of cash on hand to complete the acquisition on July 9, 2021 of subsidiaries of Stagecoach.2021. Additionally, as of SeptemberJune 30, 2021,2022, we had borrowing capacity of approximately $3.8$3.0 billion under our credit facilities (discussed below in “—Short-term Liquidity”). As discussed further below, we believe our cash flows from operating activities, cash position and remaining borrowing capacity on our credit facilities are more than adequate to allow us to manage our day-to-day cash requirements and anticipated obligations.
We have consistently generated substantial cash flows from operations, providing a source of funds of $4,440$2,648 million and $3,282$3,311 million in the first ninesix months of 20212022 and 2020,2021, respectively. The period-to-period increasedecrease is discussed below in “—Cash Flows—Operating Activities.” We primarily rely on cash provided from operations to fund our operations as well as our debt service, sustaining capital expenditures, dividend payments and our growth capital expenditures; however, we may access the debt capital markets from time to time to refinance our maturing long-term debt.debt and finance incremental investments, if any.
Our board of directors declared a quarterly dividend of $0.27$0.2775 per share for the thirdsecond quarter of 2021,2022, consistent with the dividend declared for the previous quarter. We expect to fully fund our dividend payments as well as our discretionary spending for 2021 without funding from the capital markets.
On February 11, 2021, we23, 2022, EPNG issued in a registeredprivate offering $750$300 million aggregate principal amount of 3.60%3.50% senior notes due 20512032 and received net proceeds of $741$298 million which were used to repay maturingafter discount and issuance costs.
During the first quarter, upon maturity, we repaid EPNG’s 8.625% senior notes.notes, our 4.15% corporate senior notes, and the 1.50% series of our Euro denominated debt.
On August 20, 2021,June 1, 2022, we entered into a new $3.5repaid $1 billion revolving credit facility (the “New Credit Facility”)of our 3.95% senior notes, due August 2026 and amended our existing facility (the “Existing Facility”) to reduce the borrowing capacity to $500 million and terminate the letter of credit commitments and the swing line capacity thereunder (together, the “Credit Facilities”).September 1, 2022 using short-term borrowings.
Short-term Liquidity
As of SeptemberJune 30, 2021,2022, our principal sources of short-term liquidity are (i) cash from operations; and (ii) our combined $4.0 billion of Credit Facilitiescredit facilities and associated commercial paper program. The loan commitments under our Credit Facilitiescredit facilities can be used for working capital and other general corporate purposes and as a backup to our commercial paper program. Commercial paper borrowings reduce borrowings allowed under our Credit Facilitiescredit facilities and letters of credit reduce borrowings allowed under our New Credit Facility.$3.5 billion credit facility. We provide for liquidity by maintaining a sizable amount of excess borrowing capacity under our Credit Facilitiescredit facilities and, as previously discussed, have consistently generated strong cash flows from operations. We do not anticipate any significant limitations from the impacts of COVID-19 with respect to our ability to access funding through our Credit Facilities.
As of SeptemberJune 30, 2021,2022, our $2,822$2,970 million of short-term debt consisted primarily of senior notes that mature in the next twelve months.months and outstanding commercial paper borrowings. We intend to fund our debt, as it becomes due, primarily through cash on hand, credit facility borrowings, commercial paper borrowings, cash flows from operations, and/or issuing new long-term debt. Our short-term debt balance as of December 31, 20202021 was $2,558$2,646 million.
We had working capital (defined as current assets less current liabilities) deficits of $3,139$3,284 million and $1,871$1,992 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. From time to time, our current liabilities may include short-term borrowings used to finance our expansion capital expenditures, which we may periodically replace with long-term financing and/or pay down using retained cash from operations. The overall $1,268$1,292 million unfavorable change from year-end 20202021 was primarily due to (i) a $1,082$1,040 million decrease in cash and cash equivalents primarily resulting from utilizingwhich includes $1,190 million related to repayments of senior notes that matured in the first quarter of 2022 using cash on hand to acquire subsidiaries of Stagecoach;hand; (ii) a net unfavorable short-term fair value adjustment of $253 million on derivative contract assets and liabilities in 2021; (iii) an increase in accounts payable, net of change in accounts receivable, of $212 million; (iv) a $160$936 million increase in commercial paper borrowings; and (iv) an increase(iii) net unfavorable short-term fair value adjustments on derivative contracts of $104$422 million; partially offset by (i) a $613 million decrease in senior notes that mature in the next twelve months, partially offset by (i)months; (ii) a $193$310 million decrease in accrued interest; (ii) an increase of $152 million in restricted deposits primarily related to margin calls in our derivative activities;activity; (iii) a $109$128 million increase in inventories, primarily storage gas and product inventories; andproducts inventory; (iv) a $61$62 million decrease in accrued interest; and (v) a $58 million decrease in accrued contingencies. Generally, our working capital balance varies due to factors such as the timing of scheduled debt payments, timing differences in the collection and payment of receivables and payables, the change in fair value of our derivative contracts, and changes in our cash and cash equivalent balances as a result of excess cash from operations after payments for investing and financing activities.
Counterparty Creditworthiness
Some of our customers or other counterparties may experience severe financial problems that may have a significant impact on their creditworthiness. These financial problems may arise from our current global economic conditions, continued volatility of commodity prices, or otherwise. In such situations, we utilize, to the extent allowable under applicable contracts, tariffs and regulations, prepayments and other security requirements, such as letters of credit, to enhance our credit position relating to amounts owed from these counterparties. While we believe we have taken reasonable measures to protect against counterparty credit risk, we cannot provide assurance that one or more of our customers or other counterparties will not become financially distressed and will not default on their obligations to us or that such a default or defaults will not have a material adverse effect on our business, financial position, future results of operations, or future cash flows. The balance of our allowance for credit losses as of September 30, 2021 and December 31, 2020, was $2 million and $26 million, respectively, reflected in “Other current assets” on our consolidated balance sheets.
Capital Expenditures
We account for our capital expenditures in accordance with GAAP. We also distinguish between capital expenditures that are maintenance/sustaining capital expenditures and those that are expansion capital expenditures (which we also refer to as discretionary capital expenditures). Expansion capital expenditures are those expenditures thatwhich increase throughput or capacity from that which existed immediately prior to the addition or improvement, and are not deducted in calculating DCF (see “—Results of Operations—Overview—Non-GAAP Financial Measures—DCF”). With respect to our oil and gas producing
activities, we classify a capital expenditure as an expansion capital expenditure if it is expected to increase capacity or throughput (i.e., production capacity) from the capacity or throughput immediately prior to the making or acquisition of such additions or improvements. Maintenance capital expenditures are those thatwhich maintain throughput or capacity. The distinction between maintenance and expansion capital expenditures is a physical determination rather than an economic one, irrespective of the amount by which the throughput or capacity is increased.
Budgeting of maintenance capital expenditures is done annually on a bottom-up basis. For each of our assets, we budget for and make those maintenance capital expenditures that are necessary to maintain safe and efficient operations, meet customer needs and comply with our operating policies and applicable law. We may budget for and make additional maintenance capital expenditures that we expect to produce economic benefits such as increasing efficiency and/or lowering future expenses. Budgeting and approval of expansion capital expenditures are generally made periodically throughout the year on a project-by-project basis in response to specific investment opportunities identified by our business segments from which we generally expect to receive sufficient returns to justify the expenditures. Generally, the determination of whether a capital expenditure is classified as a maintenance/sustaining or as an expansion capital expenditureexpenditures is made on a project level. The classification of our capital expenditures as expansion capital expenditures or as maintenance capital expenditures is made consistent with our accounting policies and is generally a straightforward process, but in certain circumstances can be a matter of management judgment and discretion. The classification has an impact on DCF because capital expenditures that are classified as expansion capital expenditures are not deducted from DCF, while those classified as maintenance capital expenditures are.
Our capital expenditures for the ninesix months ended SeptemberJune 30, 2021,2022, and the amount we expect to spend for the remainder of 20212022 to sustain our assets and grow our businessesbusiness are as follows:
| | | Nine Months Ended September 30, 2021 | | 2021 Remaining | | Total 2021 | | Six Months Ended June 30, 2022 | | 2022 Remaining | | Total 2022 |
| | (In millions) | | (In millions) |
Sustaining capital expenditures(a)(b) | Sustaining capital expenditures(a)(b) | $ | 558 | | | $ | 300 | | | $ | 858 | | Sustaining capital expenditures(a)(b) | $ | 338 | | | $ | 592 | | | $ | 930 | |
Discretionary capital investments(b)(c)(d) | Discretionary capital investments(b)(c)(d) | 2,049 | | | 256 | | | 2,305 | | Discretionary capital investments(b)(c)(d) | 458 | | | 1,397 | | | 1,855 | |
(a)NineSix months ended SeptemberJune 30, 2021, 20212022, 2022 Remaining, and Total 20212022 amounts include $76$47 million, $31$81 million, and $107$128 million, respectively, for sustaining capital expenditures from unconsolidated joint ventures, reduced by consolidated joint venture partners’ sustaining capital expenditures. See table included in “—Results of Operations—Non-GAAP Financial Measures—Supplemental Information.”
(b)NineSix months ended SeptemberJune 30, 20212022 amount excludes $6$53 million due to increasesdecreases in accrued capital expenditures and contractor retainage and net changes in other.
(c)NineSix months ended SeptemberJune 30, 20212022 amount includes $135$23 million of our contributions to certain unconsolidated joint ventures for capital investments. Both Nine months ended September 30, 20212022 Remaining and Total 20212022 amounts also include $1,508$358 million for our acquisitionsacquisition of Stagecoach and Kinetrex.Mas CanAm, LLC.
(d)Amounts include our actual or estimated contributions to certain equity investees,unconsolidated joint ventures, net of actual or estimated contributions from certain partners in non-wholly owned consolidated subsidiaries for capital investments.
Off Balance Sheet Arrangements
There have been no material changes in our obligations with respect to other entities that are not consolidated in our financial statements that would affect the disclosures presented as of December 31, 20202021 in our 20202021 Form 10-K.
Commitments for the purchase of property, plant and equipment as of SeptemberJune 30, 20212022 and December 31, 20202021 were $201$392 million and $141$209 million, respectively. The increase of $60$183 million was primarily driven by an overall increase of capital commitments related to our Terminals business segment.commitments.
Cash Flows
Operating Activities
Cash provided by operating activities increased $1,158decreased $663 million in the ninesix months ended SeptemberJune 30, 20212022 compared to the respective 20202021 period primarily due to:
•a $1,206$617 million increasedecrease in cash after adjusting the $1,639$652 million increase in net income by $433$1,269 million for the combined effects of the period-to-period net changes in non-cash items includingitems. This overall cash decrease primarily resulted from the following: (i) loss from impairments and divestitures, netbenefit recognized in the 2021 period for largely nonrecurring earnings related to the February 2021 winter storm (see discussion above in “—“—Results of Operations”Operations”); (ii) gain from the sale of a partial interest in our equity investment in NGPL Holdings (see discussion above in “and—General and Basis of Presentation”); (iii) DD&A expenses (including amortization of excess cost of equity investments); (iv) deferred
income taxes; and (v) earnings from equity investments (including a non-cash write-down of a related party note receivable from Ruby); partially offset by,
•a $48$46 million decrease in cash associated with net changes in working capital items and other non-current assets and liabilities. The decrease was driven, among other things, primarily by payments for litigation matters in the 2021 period which was partially offset by a net increase in working capital items and higher distributions from equity investment earnings in the 2021 period compared to the 2020 period.
Investing Activities
Cash used in investing activities increased $1,135$561 million for the ninesix months ended SeptemberJune 30, 20212022 compared to the respective 20202021 period primarily attributable to:
•a $1,502 million increase in expenditures for the acquisition of assets and investments, net of cash acquired, primarily driven by $1,197 million and $311 million of net cash used for the Stagecoach and the Kinetrex acquisitions, respectively, in the 2021 period. See Note 2 “Acquisitions” to our consolidated financial statements for further information regarding these transactions; and
•a $490$409 million decrease in cashproceeds from sales of investments primarily due to $412$413 million of net proceeds received from the sale of a partial interest in our equity investment in NGPL Holdings in the 2021 period, versus the $907period; and
•a $234 million increase in capital expenditures reflecting an overall increase of proceeds received from the sale of Pembina sharesexpansion capital projects in the 2020 period. See Note 3 “Losses and Gains on Impairments, Divestitures and Other Write-downs” to our consolidated financial statements for further information regarding2022 period over the transaction of the sale of an interest in NGPL Holdings;comparative 2021 period; partially offset by,
•a $457combined $62 million decrease in capital expenditures reflecting an overall reduction of expansion capital projects in the 2021 period over the comparative 2020 period; and
•a $329 million decreaseincrease in cash used forrelated to distributions received from equity investments in excess of cumulative earnings and lower contributions to equity investees driven primarily by lower contributions to Permian Highway Pipeline LLC and SNG in the 20212022 period compared with the 20202021 period.
Financing Activities
Cash used in financing activities increased $1,446$266 million for the ninesix months ended SeptemberJune 30, 20212022 compared to the respective 20202021 period primarily attributable to:
•$173 million cash used in repurchasing shares under our share buy-back program in the 2022 period; and
•a $1,403$58 million net increase in cash used related to debt activity as a result of higher net debt payments in the 20212022 period compared to the 20202021 period.
Dividends
We expect to declare dividends of $1.08$1.11 per share on our stock for 2021.2022. The table below reflects our 20212022 dividends declared:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Three months ended | | Total quarterly dividend per share for the period | | Date of declaration | | Date of record | | Date of dividend |
| | | | | | | | |
March 31, 20212022 | | $ | 0.270.2775 | | | April 21, 2021 | | April 30, 202120, 2022 | | May 17, 20212, 2022 | | May 16, 2022 |
| | | | | | | | |
June 30, 20212022 | | 0.270.2775 | | | July 21, 202120, 2022 | | August 2, 20211, 2022 | | August 16, 2021 |
September 30, 2021 | | 0.27 | | | October 20, 2021 | | November 1, 2021 | | November 15, 20212022 |
The actual amount of dividends to be paid on our capital stock will depend on many factors, including our financial condition and results of operations, liquidity requirements, business prospects, capital requirements, legal, regulatory and contractual constraints, tax laws, Delaware laws and other factors. See Part I, Item 1A. “Risk Factors—The guidance we provide for our anticipated dividends is based on estimates. Circumstances may arise that lead to conflicts between using funds to pay anticipated dividends or to invest in our business.” of our 20202021 Form 10-K. All of these matters will be taken into consideration by our board of directors in declaring dividends.
Our dividends are not cumulative. Consequently, if dividends on our stock are not paid at the intended levels, our stockholders are not entitled to receive those payments in the future. Our dividends generally are expected towill be paid on or about the 15th day of each February, May, August and November.
Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries
KMI and certain subsidiaries (Subsidiary Issuers) are issuers of certain debt securities. KMI and substantially all of KMI’s wholly owned domestic subsidiaries (Subsidiary Guarantors), are parties to a cross guarantee agreement whereby each party to the agreement unconditionally guarantees, jointly and severally, the payment of specified indebtedness of each other party to the agreement. Accordingly, with the exception of certain subsidiaries identified as Subsidiary Non-Guarantors,subsidiary non-guarantors (Subsidiary Non-Guarantors), the parent issuer, subsidiary issuersSubsidiary Issuers and Subsidiary Guarantors (the “Obligated Group”) are all guarantors of each series of our guaranteed debt (Guaranteed Notes). As a result of the cross guarantee agreement, a holder of any of the Guaranteed Notes issued by KMI or subsidiary issuersSubsidiary Issuers are in the same position with respect to the net assets, and income of KMI and the Subsidiary Issuers and Guarantors. The only amounts that are not available to the holders of each of the Guaranteed Notes to satisfy the repayment of such securities are the net assets, and income of the Subsidiary Non-Guarantors.
In lieu of providing separate financial statements for subsidiary issuers and guarantors,the Obligated Group, we have presented the accompanying supplemental summarized combined income statement and balance sheet information for the Obligated Group based on Rule 13-01 of the SEC’s Regulation S-X. Also, see Exhibit 10.1 to this reportReport “Cross Guarantee Agreement, dated as of November 26, 2014, among Kinder Morgan, Inc. and certain of its subsidiaries, with schedules updated as of SeptemberJune 30, 2021.2022.”
All significant intercompany items among the Obligated Group have been eliminated in the supplemental summarized combined financial information. The Obligated Group’s investment balances in Subsidiary Non-guarantorsNon-Guarantors have been excluded from the supplemental summarized combined financial information. Significant intercompany balances and activity for the Obligated Group with other related parties, including Subsidiary Non-Guarantors, (referred to as “affiliates”) are presented separately in the accompanying supplemental summarized combined financial information.
Excluding fair value adjustments, as of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Obligated Group had $30,994$30,312 million and $32,563$31,608 million, respectively, of Guaranteed Notes outstanding.
Summarized combined balance sheet and income statement information for the Obligated Group follows:
| Summarized Combined Balance Sheet Information | Summarized Combined Balance Sheet Information | September 30, 2021 | | December 31, 2020 | Summarized Combined Balance Sheet Information | June 30, 2022 | | December 31, 2021 |
| | (In millions) | | (In millions) |
| Current assets | Current assets | $ | 2,412 | | | $ | 2,957 | | Current assets | $ | 3,289 | | | $ | 3,556 | |
Current assets - affiliates | Current assets - affiliates | 1,118 | | | 1,151 | | Current assets - affiliates | 1,359 | | 1,233 | |
Noncurrent assets | Noncurrent assets | 62,129 | | | 61,783 | | Noncurrent assets | 60,978 | | 61,754 | |
Noncurrent assets - affiliates | Noncurrent assets - affiliates | 507 | | | 616 | | Noncurrent assets - affiliates | 509 | | 508 | |
Total Assets | Total Assets | $ | 66,166 | | | $ | 66,507 | | Total Assets | $ | 66,135 | | | $ | 67,051 | |
| | Current liabilities | Current liabilities | $ | 5,390 | | | $ | 4,528 | | Current liabilities | $ | 6,547 | | | $ | 5,413 | |
Current liabilities - affiliates | Current liabilities - affiliates | 1,269 | | | 1,209 | | Current liabilities - affiliates | 1,446 | | 1,332 | |
Noncurrent liabilities | Noncurrent liabilities | 31,803 | | | 33,907 | | Noncurrent liabilities | 30,491 | | 32,310 | |
Noncurrent liabilities - affiliates | Noncurrent liabilities - affiliates | 1,006 | | | 1,078 | | Noncurrent liabilities - affiliates | 1,046 | | 1,047 | |
Total Liabilities | Total Liabilities | 39,468 | | | 40,722 | | Total Liabilities | 39,530 | | | 40,102 | |
Redeemable noncontrolling interest | 661 | | | 728 | | |
| Kinder Morgan, Inc.’s stockholders’ equity | Kinder Morgan, Inc.’s stockholders’ equity | 26,037 | | | 25,057 | | Kinder Morgan, Inc.’s stockholders’ equity | 26,605 | | 26,949 | |
Total Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity | $ | 66,166 | | | $ | 66,507 | | |
Total Liabilities and Stockholders’ Equity | | Total Liabilities and Stockholders’ Equity | $ | 66,135 | | | $ | 67,051 | |
| Summarized Combined Income Statement Information | Summarized Combined Income Statement Information | Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | Summarized Combined Income Statement Information | Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
| | (In millions) | | (In millions) |
Revenues | Revenues | $ | 3,472 | | | $ | 11,211 | | Revenues | $ | 4,756 | | | $ | 8,733 | |
Operating income | Operating income | 699 | | | 1,697 | | Operating income | 889 | | 1,795 |
Net income | Net income | 373 | | | 937 | | Net income | 537 | | 1,105 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in market risk exposures that would affect the quantitative and qualitative disclosures presented as of December 31, 2020,2021, in Part II, Item 7A in our 20202021 Form 10-K. For more information on our risk management activities, refer to Item 1, Note 6 “Risk5 “Risk Management” to our consolidated financial statements.
Item 4. Controls and Procedures.
As of SeptemberJune 30, 2021,2022, our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon and as of the date of the evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There has been no change in our internal control over financial reporting during the quarter ended SeptemberJune 30, 20212022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Part I, Item 1, Note 109 to our consolidated financial statements entitled “Litigation and Environmental” which is incorporated in this item by reference.
Item 1A. Risk Factors.
There have been no material changes in the risk factors disclosed in Part I, Item 1A in our 20202021 Form 10-K. For more information on our risk management activities, refer to Part I, Item 1, Note 6 “Risk Management”5 “Risk Management” to our consolidated financial statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None. Our Purchases of Our Class P Stock | | | | | | | | | | | | | | | | | | | | | | | | | | |
Settlement Period | | Total number of securities purchased(a) | | Average price paid per security(b) | | Total number of securities purchased as part of publicly announced plans(a) | | Maximum number (or approximate dollar value) of securities that may yet be purchased under the plans or programs |
April 1 to April 30, 2022 | | 1,336,132 | | | $ | 18.45 | | | 1,336,132 | | | $ | 1,399,723,550 | |
May 1 to May 31, 2022 | | 1,563,243 | | | 18.19 | | | 1,563,243 | | | 1,371,291,985 | |
June 1 to June 30, 2022 | | 7,037,626 | | | 16.98 | | | 7,037,626 | | | 1,251,805,298 | |
| | | | | | | | |
Total | | 9,937,001 | | | $ | 17.37 | | | 9,937,001 | | | $ | 1,251,805,298 | |
(a)On July 19, 2017, our board of directors approved a $2 billion common share buy-back program that began in December 2017. After repurchase, the shares are canceled and no longer outstanding.
(b)Amount includes any commission or other costs to repurchase shares.
Subsequent to June 30, 2022 and through July 21, 2022, we repurchased 6 million of our shares for $102 million at an average price of $16.63 per share.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
The Company doesExcept for at one terminal facility that is in temporary idle status with the Mine Safety and Health Administration, we do not own or operate mines for which reporting requirements apply under the mine safety disclosure requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), except for one terminal that is in temporary idle status with the Mine Safety and Health Administration. The Company has. We have not received any specified health and safety violations, orders or citations, related assessments or legal actions, mining-related fatalities, or similar events requiring disclosure pursuant to the mine safety disclosure requirements of Dodd-Frank for the quarter ended SeptemberJune 30, 2021.2022.
Item 5. Other Information.
Effective October 20, 2021, our board of directors approved the Kinder Morgan, Inc. Second Amended and Restated Stock Compensation Plan for Non-Employee Directors (the “Amended Director Plan”), which amends and restates the previous Kinder Morgan, Inc. Amended and Restated Stock Compensation Plan for Non-Employee Directors dated January 1, 2015, asNone.
amended (the “Previous Plan”). The Amended Director Plan amends and restates the Previous Plan to increase the number of shares available for issuance under the Amended Director Plan.
The Amended Director Plan is administered by our Compensation Committee, and our board of directors has sole discretion to terminate the plan at any time. The Amended Director Plan recognizes that the compensation to be paid to each non-employee director is fixed by our board of directors, and that the compensation is payable in cash. Under the plan, in lieu of receiving some or all of the compensation in cash, non-employee directors, referred to as “eligible directors,” may elect to receive shares of our common stock. Each election generally will be at or around the first board of directors meeting in January of each year and will be effective for the entire calendar year. An eligible director may make a new election each year. The total number of shares of common stock authorized under the plan is 1,190,000.
Each annual election to receive shares of common stock will be evidenced by an agreement between us and the electing director that will contain the terms and conditions of such election. Shares issued under the plan pursuant to an election may be subject to forfeiture restrictions that lapse on the earlier of the director’s death or the date set forth in the agreement, which will be no later than the end of the calendar year to which the cash compensation relates. Until the forfeiture restrictions lapse, shares issued under the plan may not be sold, assigned, transferred, exchanged or pledged by an eligible director. In the event a director’s service as a director is terminated prior to the lapse of the forfeiture restrictions for any reason other than death or the director’s failure to be elected as a director at a stockholders meeting at which the director is considered for election, the director will, for no consideration, forfeit to us all shares then subject to the restrictions. If, prior to the lapse of the restrictions, the director is not elected as a director at a stockholders meeting at which the director is considered for election, the restrictions will lapse with respect to 50% of the director’s shares then subject to such restrictions, and the director will, for no consideration, forfeit to us the remaining shares.
The number of shares to be issued to an eligible director electing to receive any portion of annual compensation in the form of shares will equal the dollar amount elected to be received in the form of shares, divided by the closing price of our common stock on the NYSE on the day the cash compensation is awarded or, if the NYSE is not open for trading on such day, the most recent trading day (the fair market value), rounded up to the nearest ten shares. An eligible director electing to receive any portion of annual compensation in the form of shares will receive cash equal to the difference between:
•the total cash compensation awarded to such director and
•the number of shares to be issued to such director with respect to the amount determined by the director, multiplied by the fair market value of a share.
This cash payment will be payable in four equal installments, on or before March 31, June 30, September 30 and December 31 of the calendar year in which such cash compensation is awarded; provided that the installment payments will be adjusted to include dividend equivalent payments with respect to the shares during the period in which the shares are subject to forfeiture restrictions.
The foregoing is a summary of the principal provisions of the Amended Director Plan. The summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended Director Plan, which is filed as Exhibit 10.4.
Item 6. Exhibits.
Exhibit
NumberDescription
| | | | | | | | |
Exhibit Number | | Description |
10.1 | | | |
| | |
10.2 | | * | |
| | |
10.3 | | * | |
| | |
10.4 | | | |
| | |
10.5 | | | |
| | |
22.1 | | | |
| | |
31.1 | | | |
| | |
31.2 | | | |
| | |
32.1 | | | |
| | |
32.2 | | | |
| | |
101 | | | Interactive data files pursuant to Rule 405 of Regulation S-T formatted in iXBRL (Inline Extensible Business Reporting Language): (i) our Consolidated Statements of Operations for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020;2021; (ii) our Consolidated Statements of Comprehensive Income (Loss) for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020;2021; (iii) our Consolidated Balance Sheets as of SeptemberJune 30, 20212022 and December 31, 2020;2021; (iv) our Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20212022 and 2020;2021; (v) our Consolidated Statements of Stockholders’ Equity for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020;2021; and (vi) the notes to our Consolidated Financial Statements. |
| | |
104 | | | Cover Page Interactive Data File pursuant to Rule 406 of Regulation S-T formatted in iXBRL (Inline Extensible Business Reporting Language) and contained in Exhibit 101. |
_______
*Asterisk indicates exhibits incorporated by reference as indicated; all other exhibits are filed herewith, except as noted otherwise.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| KINDER MORGAN, INC. |
| | Registrant |
| | | | | | | | | | | | | | | | | |
Date: | OctoberJuly 22, 20212022 | | By: | | /s/ David P. Michels |
| | | | | David P. Michels Vice President and Chief Financial Officer (principal financial and accounting officer) |