Kinder Morgan Q1 2024 Earnings Call Transcript

AlphaStreet
Provided by AlphaStreet
April 17, 2024
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Operator

Welcome to the Quarterly Earnings Conference Call. [Operator Instructions]

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

Richard D. Kinder
Executive Chairman at Kinder Morgan

Thank you, Ted. As always, before we begin, I'd like to remind you that KMI's earnings release today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and, of course, the Securities and Exchange Act of 1934, as well as certain non-GAAP financial measures.

Before making any investment decisions, we strongly encourage you to read our full disclosure on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release as well as review our latest filings with the SEC for important material assumptions, expectations and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements.

Before turning the call over to Kim and the team, who will report a good quarter at KMI, let me comment on another broader issue. In past quarters, I've talked a lot about the demand for natural gas resulting from this country's LNG export facilities. Today, I want to speak briefly about what I and others in the industry now see as another source of increased demand for our commodity, the tremendous expected growth and the need for electric power. This growth is being driven by a number of factors, most prominently by the increasing demand of new and expanding data centers, especially those required to support AI. One recent survey showed a projected increase in electric demand to power data centers of 13% to 15% compounded annually through 2030. Put another way, data centers used about 2.5% of U.S. electricity in 2022 and are projected to use about 20% by 2030. AI demand alone is projected at about 15% of demand in 2030. If just 40% of that AI demand is served by natural gas, that would result in incremental demand of 7 Bcf to 10 Bcf a day.

Utilities throughout America are sounding the alarm. One Southeast utility announced its expectation that its winter demand would increase by 37% by 2031. PJM Interconnection, which operates the wholesale power market across part of the Midwest and the Northeast, has doubled its 15-year annual forecast for demand growth and estimates that demand in the region by 2029 will increase by about 10 gigawatts. Now, to put that in perspective, 10 gigawatts is about twice the power demand of New York City on a typical day.

The over-riding question is how to handle this increased demand. To answer that question, it's important to understand the nature of the increased demand. It's become increasingly obvious that reliability and affordability are the key factors. The power needed for AI and the massive data centers being built today and planned for the near-future require affordable [Phonetic] electricity that is available without interruption 24 hours a day, 365 days a year. This type of need demonstrates that the emphasis on renewables as the only source of power is fatally flawed in terms of meeting the real demands of the market. This is not a knock on renewables. We all know they will play a significant role in the future of electric generation, but it's a reminder to all of us that natural gas and nuclear still have an extremely important role to play in order to provide the uninterrupted power that AI and the data centers will need.

The primary user of these data centers is big tech, and I believe they're beginning to recognize the role that natural gas and nuclear must play. They, like the rest of us, realize that the wind doesn't blow all the time, sun doesn't shine all the time, that the use of batteries to overcome the shortfall is not practically or economically feasible, and finally, that, unfortunately, adding significant amounts of new nuclear power to the mix is not going to happen in the foreseeable future. In addition to all these factors, the market is now understanding that building transmission lines to connect distant renewables to the grid typically takes years to complete, and that's a timeframe inconsistent with the need to place these data centers into service as quickly as possible. All this means that natural gas must play an important role in power generation for years to come.

I think acceptance of this hypothesis will become even clearer as power demand increases over the coming months and years, and it will be one more significant driver of growth in the demand for natural gas that will benefit all of us in the midstream sector.

And with that, I'll turn it over to Kim.

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Okay. Thanks, Rich. I'm going to make a few overall points, and then I'll turn it over to Tom and David to give you all the details.

We had a great quarter. Adjusted EPS increased by 13%. EBITDA was up 7%, and that was driven by strong performance in natural gas and our refined products businesses. This type of growth is tremendous for a stable fee-based set of midstream assets as large as ours. So, the balance sheet remains strong. We ended the quarter at 4.1 times debt-to-EBITDA, and we continue to return significant value to shareholders. Today, our Board approved an increase in the dividend of $0.02 per share. This is the seventh year in a row that we've increased the dividend.

Our financial outlook of 14% growth in adjusted EPS for the year as well as the other budget guidance we provided in January is unchanged. We've seen much lower gas prices than we anticipated this year, but the long-term fundamentals in natural gas remain very strong. Gas demand is expected to grow significantly between now and 2030, with a more than doubling of LNG exports as well as a 50% increase in exports to Mexico. And that doesn't include the anticipated substantial increase in gas demand from power associated with AI and data centers, that Rich just mentioned. The estimates we've seen range anywhere from 3 Bcf to over 10 Bcf, and we've seen some estimates as high as 16 Bcf.

With respect to the LNG pause, we do not think it impacts our planned projects or the growth in the LNG market between now and 2030, although it could impact the mix of projects. But we think that is an unwise -- we think the LNG pause is an unwise decision and bad policy. Our petroleum products business continues to produce very stable cash flow. Volumes are steady and much of the business has tariff-for-contract escalators. It will produce nice cash flow for years to come. It's also a capital-efficient business and has some nice growth opportunities around the edges in product blending, renewable diesel and other sustainable fuels.

Our backlog of projects increased by about $300 million during the quarter due to new natural gas projects added. The backlog and the multiple -- the multiple on the backlog remains less than five times. And I also think that we've got significant opportunity to add to the backlog within the next year.

In our ETV business, we secured pore space in the Houston Ship Channel for CO2 sequestration, with capacity to store more than 300 million tons. Significant distance between the emitting source and the sequestration site often challenges the CCS economics. And we've secured a very strategically located site. So, we had a nice quarter in terms of growth. We continue to expect nice growth for the year. We've got a sound balance sheet. We returned significant value to our shareholders, and we have nice opportunities to invest in the longer-term.

With that, I'll turn it over to Tom to give you details on the business performance for the quarter.

Tom Martin
President at Kinder Morgan

Thanks, Kim. Starting with the Natural Gas business unit. Transport volumes increased by 2% for the quarter versus the first quarter of 2023, driven primarily by increased flows Eastbound on Iraqi's interstate pipelines into the Mid-Continent region, the Permian highway expansion project being placed into service, and increased flows into our LNG customers in Texas, partially offset by decreased volumes delivered to local distribution companies on the East Coast, as we had a warmer winter this quarter compared to the first quarter of 2023.

Our natural gas gathering volumes were up 17% for the quarter compared to the first quarter of 2023, driven by the Haynesville and Eagle Ford volumes, which were up 35% and 12%, respectively. Given the low price environment, we are now expecting gathering volumes to average 5% below our 2024 plan, but still 7% over 2023, adjusting for asset sales in both cases. We've delayed about 10% of our 2024 budgeted G&P capex spend until supply growth returns. And we view this slight pullback in gathering volumes as temporary, given higher production volumes will be necessary to meet the demand growth from LNG expected in early 2025.

A quick update on our newly acquired South Texas midstream assets in our Texas intrastate market. The integration of the assets and personnel is going well. We are progressing some of the upside opportunities that we assumed in the acquisition sooner than expected. We feel very good about the long-term earnings expectation and valuation multiple for the acquisition. Our experience in other acquisitions has been that we tend to achieve more value over-time than we originally expected from acquiring assets that are highly integrated with our existing network. We are already seeing evidence of that with these assets.

In our Products Pipeline segment, refined product and crude and condensate volumes were down 1% for the quarter versus 2023. Gasoline volumes were down 3%, partially offset by an increase in diesel and jet fuel, 2% and 1% increases, respectively. RD volumes flowing through our assets in California continued to grow. We averaged 37,000 barrels a day for the quarter, and we're exploring opportunities to expand our RD capabilities in the Pacific Northwest.

Our Terminals segment, our liquids lease capacity remains high at 95% -- 94%. Utilization at our key hubs at the Houston Ship Channel in the New York Harbor remained very strong, primarily due to favorable blend margins. Our Jones Act tankers are 100% leased through 2024 and 92% leased through 2025, assuming likely options are exercised. The CO2 business segment experienced 4% lower oil production volumes, 9% higher NGL volumes and 7% lower CO2 volumes in the quarter versus the first quarter of 2023.

With that, I'll turn it over to David Michels.

David P. Michels
Vice President and Chief Financial Officer at Kinder Morgan

Okay. Thank you, Tom. So, for the first quarter of 2024, we're declaring a dividend of $0.2875 per share, which is $1.15 per share annualized, up 2% from 2023. For the quarter, we generated revenues of $3.85 billion, which was down $38 million from Q1 of 2023. Our cost of sales was down $108 million, so our gross margin increased 3%, which explains most of the 2% growth in our operating income.

Equity from earnings -- excuse me, earnings from equity investments is up $78 million, but $65 million of that was due to a non-cash impairment we took in the first quarter of last year. We saw a year-over-year growth from our Natural Gas, Products and Terminals businesses. The main drivers of that growth came from project contributions -- growth project contributions placed in-service across each of those business units as well as from additional contributions from our acquired South Texas midstream assets. We also had higher margins on our natural gas storage assets and higher volumes on our natural gas gathering systems.

Interest expense was up due to a higher short-term debt balance due in-part to the South Texas acquisition. And we generated net income attributable to KMI of $746 million and EPS of $0.33, both up 10% from Q1 of last year. On an adjusted net income basis, which excludes certain items, we generated $758 million, up 12% from Q1 of last year, and we generated adjusted EPS of $0.34, up 13% from last year. So, nice growth, as Kim mentioned. Our average share count reduced by 27 million shares or 1% due to our share repurchase efforts, and our DCF per share was $0.64, up 5% from last year. Our first quarter DCF was impacted by higher cash taxes and sustaining capex, but that is due to timing of our cash tax payments and maintenance projects. We expect cash taxes to be favorable for the full-year and sustaining capital to be in-line with our budget for the full-year.

On our balance sheet, we ended the first quarter with $31.9 billion of net debt, which increased $94 million from the beginning of the year. And here is a high-level reconciliation of that increase. We generated $1.189 billion of cash flow from operations. We paid $630 million in dividends, and we spent about $620 million in total capital, including growth sustaining and contributions to our joint ventures.

Now, finally, as you can see in our press release, we are adjusting our long-term leverage target from around 4.5 times to a range of 3.5 times to 4.5 times. We've been operating near the midpoint of that range for several years and we believe this range is the appropriate long-term guidance for a company like ours that has significant scale and a high-quality business mix, which produces stable cash flows backed by multi-year contracts.

And now, with that, back to Kim.

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Okay. Ted, if you would open it up for Q&A, and we'll take the first question.

Skip to Participants
Operator

Yes. The phone lines are now open for questions. [Operator Instructions]

The first question is from John Mackay with Goldman Sachs. Your line is open.

John Mackay
Analyst at The Goldman Sachs Group

Hey, good afternoon, everyone. Thank you for the time. Maybe, we'll start on the leverage target, because I know that's been a focus for a while. Would love just to hear a little bit more on the decision process to bring it down.

And then, if we're looking-forward relative to how you guys have been operating the last few years, what are the kind of practical outputs you could say or decisions you'll make internally with this new target? Thanks.

David P. Michels
Vice President and Chief Financial Officer at Kinder Morgan

Sure. So, we started assessing this when our actual operating leverage started gravitating further away from the target leverage of 4.5 times, the budget for 2024 has us at 3.9 times. So, that's when we started assessing it. The timing of the change doesn't really have any -- there's no magic to why we're changing it now except for that slight difference in gravitating away from the 4.5.

The practical implications of this change are really -- we're not changing the way that we operate our Company. We've always, kind of, had the leverage target of 4.5, but viewed having some cushion below that 4.5 as valuable. We think that this 3.5 to 4.5 is more reflective of where we've been operating and how we'll continue to operate the Company going forward.

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Well, I would just reiterate what David said, it's just bringing our policy in-line with the way that we run the business. And so, there is no change to our overall capital allocation philosophy.

John Mackay
Analyst at The Goldman Sachs Group

All right. Appreciate that. And maybe, shifting gears, you obviously started on the big demand ramp we're hoping to see on the PowerGen side. Talked through the -- you guys talked through the macro really well. Maybe, what I wanted to ask on is just tying that to the micro side. If we're looking at Kinder, over the next couple of years, where do you see the biggest opportunities for you guys specifically?

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Well, I think, it's pretty early in all of this. And so, I think, Rich laid out really well sort of what we expect to happen in that market. But if you look right now, I think, we serve roughly 20% of the power market in the U.S. And so, I think we would -- and that's of the overall power market. This will have -- this will primarily be focused, we think, on gas, because of what Rich said with respect to unique consistent power or it could have some renewable aspect with gas backup. I think, nuclear just will take too long to develop given when we expect this demand to happen.

So, we move 40% of the gas in the U.S. And so, we would expect to realize a significant portion of this opportunity. But putting an exact number on that right now is very difficult, because we still don't even know exactly how much the demand is going to be, as you can see from the range of numbers that we discussed here earlier.

Richard D. Kinder
Executive Chairman at Kinder Morgan

Well, if you just look at overall demand, we've been talking about for months and years, calibrating the demand for LNG export and how much that adds, this is another leg to the stool really. And whether it's 5 Bcf a day or 10 Bcf a day, we don't know, but it's clearly going to be another leg of the stool in terms of natural gas demand. And I think it will tend to be located near reliable electric generation, because if you're Microsoft or Google, you want that power as close to your facility as possible.

Tom Martin
President at Kinder Morgan

Yeah. I guess, one other additional point there. Just, if you look at the scale of our network across the country on natural gas, I think that gives us a great opportunity to serve this market wherever it develops. And I think our reach is unparalleled in the sector.

John Mackay
Analyst at The Goldman Sachs Group

All right. I appreciate all that. Thank you very much.

Operator

Next question in the queue is from Michael Blum with Wells Fargo. Your line is open.

Michael Blum
Analyst at Wells Fargo & Company

Thanks. Good afternoon, everybody. I wanted to ask about the Permian, West Texas. Obviously, Waha prices have been negative of late. And I'm wondering if you can just remind us if there is a benefit there to you? Is there any negative impacts? Just overall how those low Waha prices are impacting you?

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Okay. Sital?

Sital Mody
President, Natural Gas Pipelines at Kinder Morgan

Yeah. So, just first, the price macro here at this point in time, or micro, as purely a result of that -- this warm winter that we had, that wouldn't normally be. Like this way, I'm not trying to predict pricing.

That being said, on the intrastate markets, we do share some of that upside with some of our proprietary storage that we hold. And so, that's where we see some of the benefit. It's, obviously, longer-term. We've been saying this for some time. There's -- we see a need for another pipe, and I'll just nip it in the bud, while I'm talking to you. We don't have anything to announce today, but we continue to try and work on trying to commercialize another pipe, still having discussions with customers along those front, but nothing to report this morning -- this afternoon.

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

We've got a little bit of capacity on PHP and GCX. We've hedged a lot of that for this year, but there's a little bit open. But as you go out in time, more of that capacity is open. So, we participate, I'd say, around the margin when those spreads blow-out. So, that delivers a little bit of benefit to our shareholders.

Michael Blum
Analyst at Wells Fargo & Company

Great. And then, maybe, if I can just push on that. So, you said you're still working on a project, nothing to announce. Is that more likely to be something like Permian Pass, or do you think something more like GCX expansion could happen, or both?

Sital Mody
President, Natural Gas Pipelines at Kinder Morgan

Well, look, we're -- we continue to try and commercialize both. As I said the last time, highly competitive. We think there's a need. It's just a -- it's a matter of making sure we have the contract to support the investment.

Michael Blum
Analyst at Wells Fargo & Company

Great. Thank you.

Operator

And the next question in the queue is from Jeremy Tonet with J.P. Morgan. Your line is open.

Jeremy Tonet
Analyst at J.P. Morgan

Hi, good afternoon.

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Hello, Jeremy.

Jeremy Tonet
Analyst at J.P. Morgan

I just want to come back to the gathering volumes as you laid out. It seems coming in a bit below budget there. I was wondering if you could dive in a little bit more by basin, where you see those volumes coming in softer than budget?

Tom Martin
President at Kinder Morgan

From a budget perspective, yeah, it's slightly below budget in the Eagle Ford and the Bakken. Those are -- well, and even a little bit in the Haynesville overall, but still good growth year-over-year. And like I said earlier, I think this is a temporary blip in development of the production, because as demand picks up next year, we're certainly going to need all these volumes and more to meet that demand.

Jeremy Tonet
Analyst at J.P. Morgan

Got it. That's helpful there. And I was just curious, I guess, from a higher-level thought process. We've seen some large-cap peers out there look to kind of separate the business along commodity lines, such as natural gas versus crude oil. And just wondering how Kinder thinks about the business today, be it the Natural Gas Pipes versus the Terminals versus the CO2, if you still see the same synergies of having it all under the same roof or how you think about that in the current environment?

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Sure. I mean, all the businesses that we own and operate, we like, we think they provide stable cash-flow and good opportunities. I think that really we could simplify it a little bit for you. I mean, if you put Products and Terminals together, since they're both primarily refined products, we'd have essentially three different commodity lines. We'd have natural gas, we'd have petroleum products and we'd have the CO2. I think on CO2, that oil production is going to be needed for a long-time. There's going to be incremental opportunities for CO2 flooding in the Permian as you get through all the primary production. And I think that business gives us the expertise that we need to exploit the CCS business.

And so, the reservoir engineers that we use in that business help us as we go out and talk to customers and talk to them about sequestering their gas and being able to keep it in certain reservoirs. And so, the -- we -- the businesses we own and operate, we think are similar and that they are stable fee-based assets that are core to the energy infrastructure, and we will continue to operate them, absent somebody coming in and offering to buy them at a great price, in which case, we are highly economic and we would entertain that. But I think absent getting a wonderful price for our shareholders, we are happy with the businesses that we own.

Jeremy Tonet
Analyst at J.P. Morgan

Got it. Understood. Thank you.

Operator

Next question is from Neal Dingmann with Truist Securities. Your line is open.

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Hey, Neal. I guess, no Neal.

Operator

Neal, if you're there, please check your mute button.

Neal Dingmann
Analyst at Truist Securities

Sorry about that. Good afternoon, Kim. My question is on shareholder return. Given the new plan for -- I guess, not -- the modified plan, I'd say, for the leverage, will that change anything with these thoughts towards dividends and buybacks on a go-forward?

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

No, it has -- and let me say this again, so that it is clear to everybody. This change is just bringing our policy in-line with the way that we have operated over the last couple of years. There is no zero change in our capital allocation philosophy.

Neal Dingmann
Analyst at Truist Securities

Very clear. And then, just a quick follow-up on the STX. I think, I got that one. On the acquired STX midstream assets. I'm just wondering, is that kind of going as you had thought. Maybe just talk about integration and potentially, even, maybe more upside than expected? It seems like it's going quite well.

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

South Texas?

Tom Martin
President at Kinder Morgan

Yeah. So...

Neal Dingmann
Analyst at Truist Securities

Yeah.

Tom Martin
President at Kinder Morgan

I mean, early days, obviously. But yes, we are seeing some of the commercial and development opportunities that we were contemplating when we made the acquisition. We're seeing those opportunities come together sooner than we originally expecting. Some of those were out even several years from now. I think, we may see something even sooner than that this year or next year on some of those opportunities.

But yes, the -- on the other side, we are seeing slightly lower volumes this year to start with, again, given the lower price environment. But overall, we feel we're going to be on our acquisition model for 2024.

Neal Dingmann
Analyst at Truist Securities

[Speech Overlap] Thanks for the details.

Operator

And the next question is from Keith Stanley with Wolfe Research. Your line is open.

Keith Stanley
Analyst at Wolfe Research

Hi, good afternoon. Just one question on the backlog. So, you increased to $300 million. I think, you said, you brought on -- added some gas projects. Just I'm not sure if other projects came into service, so maybe it's even more than $300 million. Just give more color on what projects you added? Was there anything notable on that?

And then, a follow-up, Kim, just...

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Yeah. We added, Keith, about $400 million and we put $100 million of projects in service to get to the $300 million net additions. And on the projects that we added in gas, we added one interstate project on TGP. We added an intrastate lateral project on the Texas intrastate and we added a pipeline egress project in Altamonte, which is on the gathering and processing side.

Keith Stanley
Analyst at Wolfe Research

Got it. That was all for me. Thank you.

Operator

And the next question in the queue is from Theresa Chen with Barclays. Your line is open.

Theresa Chen
Analyst at Barclays

Good afternoon. Thank you for taking my questions. I'd like to touch on the theme of increased demand for power-related to AI and data centers. Just curious if you had any early discussions with customers as far as the steps it would take to commercialize these activities and these potential projects on your system and what that could look like?

Sital Mody
President, Natural Gas Pipelines at Kinder Morgan

Yeah. So, this is Sital. Just to give you a -- I'll give you a micro example of something we're working on in the Southeast. We've got a data center looking to connect to our system. As Rich alluded to, reliability is very important. They're -- not only are they looking for reliable power supply, the power provider itself is looking for incremental capacity.

And on top of that, the data center is looking for incremental storage to backstop the intermittency of their backup power generator to the effect that it's not available. So, that's an example of something we're looking at in terms of the broader themes. I think they're looking for access to reliable power. They're looking for access to, obviously, large populations and land, and then water is important for cooling purposes. So, those are kind of some of the themes in our discussions, but specifically, that's a good example of something we're working on in the Southeast.

Theresa Chen
Analyst at Barclays

Thank you, Sital. And Kim, to your earlier comment about significant opportunities to add to the backlog within the next year or so, is that referring to an egress solution out of the Permian? Is there more to that comment? If you could help us unpack, that would be great.

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Sure. So, I think, it just -- it refers to a broad set of opportunities that we're looking at. And so, that is on the supply side. There could be things around Haynesville, we've talked about already on this call, coming out-of-the Permian. There is opportunities coming out of the Eagle Ford, as all these basins are going to have to ramp-up just to get to the 20 Bcf of growth that we've been talking about, before you add on top of that, what all the data center and AI demand growth numbers that we've talked about.

So, it is supply into the Southeast, it's the LNG. On the demand side -- it's the industrial growth, on the demand side. It is LNG, potentially, on the West Coast. It's market power growth out on -- in the West. It's power growth in Mexico on the West Coast. So, I mean, there's a whole bunch of fundamental factors that are driving this. And I think what we're seeing is that the opportunity set has grown. And so -- but we aren't to the point of commercialization of the opportunity set. We won't get all the things that we're looking at.

But I think that once you start looking at larger opportunity sets, over-time, we're going to add those to the backlog. And so, I think some of these opportunities are going to come to fruition within the next year, and that's really what's behind my comment.

Theresa Chen
Analyst at Barclays

Thank you.

Operator

And the next question is from Dan Lungo with Bank of America. Your line is open.

Daniel Lungo
Analyst at Bank of America

Hi, guys. Thanks for taking my question. I just want to turn back to the leverage target real quick. I know nothing has changed with capital allocation priorities. I was just wondering if you could comment what type of factors would drive it to the higher-end of the range and the lower-end of the range outside of, obviously, the right acquisition?

Kimberly Allen Dang
Chief Executive Officer at Kinder Morgan

Yeah. So, I mean, here's what I'd say is, as -- if we see an acquisition or there's some huge expansion opportunity, that could result in leverage going up for a period of time. If there are periods of time when there's less opportunity, obviously, we produce tremendous amounts of cash flow. And then, you could create capacity on the balance sheet for a period of time until more opportunity came along. And so, that's why the range. It gives us the flexibility to move up and down, inside that range, depending on what the environment looks like.

Daniel Lungo
Analyst at Bank of America

Thanks. Very clear. And then, does this change anything in regards to how the rating agencies view you? Obviously, you've been operating like this for a while. So, I don't think it will, but just any comments around what the agencies have said to you guys?

David P. Michels
Vice President and Chief Financial Officer at Kinder Morgan

We don't want to speak for the agencies, but I do think it matters that 4.5 being our previous target was viewed somewhat by the agencies and certainly by some of our fixed income investors as where we would like to operate with our leverage over the longer period of time. So, get up to that 4.5 times.

In reality, the way we operated was we operated with some cushion below that. So, we think that this leverage target is more in-line with the way we've been operating, which is what we've told everyone for a long time. But I think by making this change, I think, it will have some impact on the way that the rating agencies view our financial policy as well as our fixed income investors.

Daniel Lungo
Analyst at Bank of America

Thanks. Really clear.

Operator

And I'm showing no further phone questions at this time.

Richard D. Kinder
Executive Chairman at Kinder Morgan

Okay. Well, thank you all very much. Have a good evening.

Operator

[Operator Closing Remarks]

Corporate Executives
  • Richard D. Kinder
    Executive Chairman
  • Kimberly Allen Dang
    Chief Executive Officer
  • Tom Martin
    President
  • David P. Michels
    Vice President and Chief Financial Officer
  • Sital Mody
    President, Natural Gas Pipelines
Analysts

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