Full-year 2017 earnings of 66 cents beat the Zacks Consensus Estimate of 65 cents and was in line with the year-ago figure.

Total revenues for the quarter rose 7.2% year over year to $3,632million. The top line also surpassed the Zacks Consensus Estimate of $3,324million.

For 2017, total revenues were $13,705 million, up from $13,058 million reported in 2016. Revenues also beat the Zacks Consensus Estimate of $13,361 million.

Higher contributions from Elba Express pipeline and Tennessee Gas Pipeline (TGP) supported the company’s strong fourth-quarter results. It was partially offset by higher expenses and the negative impact on tariff rates of Colorado Interstate Gas Company pipeline following the rate case settlement in 2016.

Dividend

Kinder Morgan maintained quarterly dividend at 12.5 cents per share (50 cents per share annualized). The dividend is payable on Feb 15 to shareholders on record as of Jan 31, 2018.

Segment Analysis

Natural Gas Pipelines: Operating income from this segment was $1,027 million, up 4% from $986 million in the year-ago quarter. The upside can be attributed to improved contributions from TGP owing to incremental short-term capacity sales and projects commissioned.

Lower interest expense from Natural Gas Pipeline of America (NGPL) and SNG due to completion of an expansion project is favorable as well. Higher results from the Elba Express pipeline also contributed to the growth.

However, an adverse impact on the tariff rates of Colorado Interstate Gas Company pipeline following the rate case settlement in 2016 and disruptions caused by tropical storm Harvey contributed to lower income.

• CO2: The segment reported earnings of $228 million, which declined 4% from $238 million in fourth-quarter 2016. Lower commodity prices were responsible for the downside.
• Terminals: This business unit delivered profit of $317 million, which improved 4% from $305 million in the Oct-Dec quarter of 2016, owing to growth in liquids operations.
• Products Pipelines: This segment recorded earnings of $314 million, up 2% year over year. Higher throughput on SFPP, CalNev and Kinder Morgan Southeast Terminals were responsible for the improvement.
• Kinder Morgan Canada: The segment reported earnings of $50 million, which increased 22% from $41 million in fourth-quarter 2016. Higher capitalized equity financing costs related to the Trans Mountain Expansion Project, timing of operating costs and foreign exchange effects driven by a stronger Canadian dollar in 2017 boosted growth.

Operational Highlights

Total expenses in the quarter were $2,820 million, up 14.9% from $2,455 million spent in the fourth quarter of 2016.  Operating income of $812 million fell 13.1% from $934.0 million in the year-ago quarter.

Financials

The company reported fourth-quarter distributable cash flow of $1,190 million compared with $1,147 million in the year-earlier quarter. The increase is mainly attributable to higher contributions from TGP as a result of incremental short-term capacity sales and projects commissioned. Higher income from CO2 and Terminals segment along with higher volumes also contributed to the growth.

As of Dec 31, 2017, Kinder Morgan had $264 million in cash and cash equivalents. The company’s long-term debt amounted to $33,988 million at the end of the quarter.   

Outlook

Investors should know that the company is likely to increase annual dividend to 80 cents per share in 2018, up 60% from the dividend in 2017. Management predicted dividend increase during first-quarter 2018. It expects EBITDA and distributable cash flow of about $7.5 billion and $4.57 billion, respectively.

For 2018, Kinder Morgan anticipates the capital expenditure at $2.2 billion for growth projects. The company plans to finance the investment through cash flow that are generated internally.

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