Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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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 2021 Form 10-K; (ii) our management’s discussion and analysis of financial condition and results of operations included in our 2021 Form 10-K; (iii) “Information Regarding Forward-Looking Statements” at the beginning of this report and in our 2021 Form 10-K; and (iv) “Risk Factors” in our 2021 Form 10-K.

2022 Dividends and Discretionary Capital

We expect to declare dividends of $1.11 per share for 2022, a 3% increase from the 2021 declared dividends of $1.08 per share. We now expect to invest $1.5 billion in expansion projects and contributions to joint ventures or discretionary capital expenditures during 2022.

The expectations for 2022 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 7, “Reportable Segments”) and Net income 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 months ended March 31, 2022 and 2021 present Segment EBDA and Net income 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 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 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 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 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 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 per share. See “—Non-GAAP Financial Measures—Reconciliation of Net Income Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted Earnings to DCF” below.

DCF

DCF is calculated by adjusting Net income 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 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 Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted Earnings to DCF” and “—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 attributable to Kinder Morgan, Inc. See “—Adjusted Segment EBDA to Adjusted EBITDA to DCF” and “—Non-GAAP Financial Measures—Reconciliation of Net Income 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 March 31, 2022, by subtracting the following amounts from our debt balance of $32,083 million: (i) cash and cash equivalents of $84 million; (ii) debt fair value adjustments of $584 million; and (iii) the foreign exchange impact on Euro-denominated bonds of $10 million for which we have entered into currency 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 March 31,
	2022		2021		Earnings increase/(decrease)
	(In millions, except percentages)
Segment EBDA(a)
Natural Gas Pipelines	$	1,184	$	2,103	$	(919)	(44)	%
Products Pipelines	299		248		51		21	%
Terminals	238		227		11		5	%
CO2	192		286		(94)		(33)	%


Total Segment EBDA	1,913		2,864		(951)		(33)	%
DD&A	(538)		(541)		3		1	%
Amortization of excess cost of equity investments	(19)		(22)		3		14	%

General and administrative and corporate charges	(145)		(148)		3		2	%

Interest, net	(333)		(377)		44		12	%
Income before income taxes	878		1,776		(898)		(51)	%
Income tax expense	(194)		(351)		157		45	%


Net income	684		1,425		(741)		(52)	%
Net income attributable to noncontrolling interests	(17)		(16)		(1)		(6)	%
Net income attributable to Kinder Morgan, Inc.	$	667	$	1,409	$	(742)	(53)	%

(a)Includes revenues, earnings from equity investments, operating expenses, gain on divestitures and impairments, net, other income, net, and other, net. Operating expenses include costs of sales, operations and maintenance expenses, and taxes, other than income taxes.

Net income attributable to Kinder Morgan, Inc. decreased $742 million in 2022 compared to 2021. The decrease primarily resulted from the benefit in the 2021 period of $1,077 million for largely nonrecurring earnings related to the February 2021 winter storm, mostly impacting the earnings from our Natural Gas Pipelines and CO2 business segments partially offset by lower income tax expense and higher earnings from our Products Pipelines business segment.

Certain Items Affecting Consolidated Earnings Results


	Three Months Ended March 31,
	2022						2021
	GAAP		Certain Items		Adjusted		GAAP		Certain Items		Adjusted		Adjusted amounts increase/(decrease) to earnings
	(In millions)
Segment EBDA
Natural Gas Pipelines	$	1,184	$	113	$	1,297	$	2,103	$	(9)	$	2,094	$	(797)
Products Pipelines	299		—		299		248		15		263		36
Terminals	238		—		238		227		—		227		11
CO2	192		16		208		286		5		291		(83)

Total Segment EBDA(a)	1,913		129		2,042		2,864		11		2,875		(833)
DD&A and amortization of excess cost of equity investments	(557)		—		(557)		(563)		—		(563)		6
General and administrative and corporate charges(a)	(145)		—		(145)		(148)		—		(148)		3
Interest, net(a)	(333)		(44)		(377)		(377)		(6)		(383)		6
Income before income taxes	878		85		963		1,776		5		1,781		(818)
Income tax expense(b)	(194)		(20)		(214)		(351)		(40)		(391)		177
Net income	684		65		749		1,425		(35)		1,390		(641)
Net income attributable to noncontrolling interests(a)	(17)		—		(17)		(16)		—		(16)		(1)

Net income attributable to Kinder Morgan, Inc.	$	667	$	65	$	732	$	1,409	$	(35)	$	1,374	$	(642)

(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 attributable to Kinder Morgan, Inc. adjusted for Certain Items (Adjusted Earnings) decreased by $642 million from the prior year resulting from earnings decreases of $834 million from our Natural Gas Pipelines business segment’s Midstream region and $93 million from our CO2 business segment’s oil and gas producing activities (both primarily related to the February 2021 winter storm, and therefore largely nonrecurring) partially offset by lower income tax expense and higher earnings from our Products Pipelines business segment.

Non-GAAP Financial Measures

Reconciliation of Net Income Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted Earnings to DCF


	Three Months Ended March 31,
		2022		2021
		(In millions)
Net income attributable to Kinder Morgan, Inc. (GAAP)		$	667	$	1,409
Total Certain Items		65		(35)
Adjusted Earnings(a)		732		1,374
DD&A and amortization of excess cost of equity investments for DCF(b)		623		638
Income tax expense for DCF(a)(b)		235		419
Cash taxes(b)		(1)		1
Sustaining capital expenditures(b)		(125)		(107)
Other items(c)		(9)		4
DCF		$	1,455	$	2,329

Adjusted Segment EBDA to Adjusted EBITDA to DCF


	Three Months Ended March 31,
		2022		2021
		(In millions, except per share amounts)
Natural Gas Pipelines		$	1,297	$	2,094
Products Pipelines		299		263
Terminals		238		227
CO2		208		291

Adjusted Segment EBDA(a)		2,042		2,875
General and administrative and corporate charges(a)		(145)		(148)
Joint venture DD&A and income tax expense(a)(b)		87		103
Net income attributable to noncontrolling interests(a)		(17)		(16)
Adjusted EBITDA		1,967		2,814
Interest, net(a)		(377)		(383)
Cash taxes(b)		(1)		1
Sustaining capital expenditures(b)		(125)		(107)


Other items(c)		(9)		4
DCF		$	1,455	$	2,329

Adjusted Earnings per share		$	0.32	$	0.60
Weighted average shares outstanding for dividends(d)		2,280		2,277
DCF per share		$	0.64	$	1.02
Declared dividends per share		$	0.2775	$	0.27

(a)Amounts are adjusted for Certain Items. See tables included in “—Reconciliation of Net Income 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 Attributable to Kinder Morgan, Inc. (GAAP) to Adjusted EBITDA


	Three Months Ended March 31,
		2022		2021
		(In millions)
Net income attributable to Kinder Morgan, Inc. (GAAP)		$	667	$	1,409
Certain Items:
Fair value amortization		(4)		(4)
Legal, environmental and taxes other than income tax reserves		—		84
Change in fair value of derivative contracts(a)		82		14
Gain on divestitures, impairments and other write-downs, net(b)		—		(89)



Income tax Certain Items		(20)		(40)


Other		7		—
Total Certain Items(c)		65		(35)
DD&A and amortization of excess cost of equity investments		557		563
Income tax expense(d)		214		391
Joint venture DD&A and income tax expense(d)(e)		87		103
Interest, net(d)		377		383

Adjusted EBITDA		$	1,967	$	2,814

(a)Gains or losses are reflected in our DCF when realized.

(b)2021 amount includes a pre-tax gain of $206 million associated with the sale of a partial interest in our equity investment in NGPL Holdings LLC, offset partially by a write-down of $117 million on a long-term subordinated note receivable from an equity investee, Ruby, reported within “Other, net” and “Earnings from equity investments,” respectively, on the accompanying consolidated statement of income.

(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.

(e)Represents joint venture DD&A and income tax expense. See tables included in “—Supplemental Information” below.

Supplemental Information


	Three Months Ended March 31,
		2022		2021
		(In millions)
DD&A (GAAP)		$	538	$	541
Amortization of excess cost of equity investments (GAAP)		19		22
DD&A and amortization of excess cost of equity investments		557		563
Joint venture DD&A		66		75

DD&A and amortization of excess cost of equity investments for DCF		$	623	$	638

Income tax expense (GAAP)		$	194	$	351
Certain Items		20		40
Income tax expense(a)		214		391
Unconsolidated joint venture income tax expense(a)(b)		21		28

Income tax expense for DCF(a)		$	235	$	419

Additional joint venture information
Unconsolidated joint venture DD&A		$	77	$	86
Less: Consolidated joint venture partners’ DD&A		11		11
Joint venture DD&A		66		75
Unconsolidated joint venture income tax expense(a)(b)		21		28
Joint venture DD&A and income tax expense(a)		$	87	$	103

Unconsolidated joint venture cash taxes(b)		$	—	$	—

Unconsolidated joint venture sustaining capital expenditures		$	(12)	$	(20)
Less: Consolidated joint venture partners’ sustaining capital expenditures		(2)		(1)
Joint venture sustaining capital expenditures		$	(10)	$	(19)

(a)Amounts are adjusted for Certain Items.

(b)Amounts are associated with our Citrus, NGPL and Products (SE) Pipe Line equity investments.

Segment Earnings Results

Natural Gas Pipelines


	Three Months Ended March 31,
		2022		2021
		(In millions, except operating statistics)
Revenues		$	2,813	$	4,125
Operating expenses		(1,784)		(2,270)

Other income		1		1
Earnings from equity investments		154		41

Other, net		—		206
Segment EBDA		1,184		2,103
Certain Items(a)		113		(9)
Adjusted Segment EBDA		$	1,297	$	2,094

Change from prior period		Increase/(Decrease)
Adjusted Segment EBDA		$	(797)

Volumetric data(b)
Transport volumes (BBtu/d)		39,731		38,850
Sales volumes (BBtu/d)		2,515		2,260
Gathering volumes (BBtu/d)		2,817		2,509
NGLs (MBbl/d)		32		30

Certain Items affecting Segment EBDA

(a)Includes Certain Item amounts of $113 million and $(9) million for 2022 and 2021, respectively. 2022 amount includes a decrease in revenues of $14 million and an increase in costs of sales of $87 million related to non-cash mark-to-market derivative contracts used to hedge forecasted natural gas and NGL sales and purchases. 2021 amount includes a pre-tax gain of $206 million associated with the sale of a partial interest in our 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.

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.

Below are the changes in Adjusted Segment EBDA in the comparable three-month periods ended March 31, 2022 and 2021:

Three Months Ended March 31, 2022 versus Three Months Ended March 31, 2021


	Adjusted Segment EBDA
	2022		2021		increase/(decrease)
Midstream	$	384	$	1,218	$	(834)
West	261		286		(25)
East	652		590		62



Total Natural Gas Pipelines	$	1,297	$	2,094	$	(797)

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-month periods ended March 31, 2022 and 2021:

$834 million (68%) decrease in Midstream was primarily due to lower commodity prices, primarily as a result of the February 2021 winter storm, driving lower sales margins resulting in decreases of $869 million on our Texas intrastate natural gas pipeline operations and $88 million on our South Texas assets. These decreases were partially offset by higher earnings on our Oklahoma assets from lower commodity prices on certain purchase contracts as a result of the February 2021 winter storm and higher volumes on Kinderhawk Field Services LLC. Overall Midstream’s revenues decreased primarily due to lower commodity prices, primarily as a result of the February 2021 winter storm, which was partially offset by corresponding decrease in costs of sales; and
$25 million (9%) decrease in the West Region was primarily due to lower earnings from EPNG driven by lower fee and park and loan revenues; and lower earnings from Colorado Interstate Gas Company, L.L.C. driven by lower revenues due to contract expirations; partially offset by,
$62 million (11%) increase in the East Region was primarily due to (i) our July 2021 acquisition of the Stagecoach assets; and (ii) higher earnings from TGP primarily due to increases in transportation revenues as a result of new customer contracts partially offset by lower revenues as a result of the February 2021 winter storm.

Products Pipelines


	Three Months Ended March 31,
		2022		2021
		(In millions, except operating statistics)
Revenues		$	766	$	453
Operating expenses		(497)		(219)
Gain on divestitures and impairments, net		12		—

Earnings from equity investments		18		14


Segment EBDA		299		248
Certain Items(a)		—		15
Adjusted Segment EBDA		$	299	$	263

Change from prior period		Increase/(Decrease)
Adjusted Segment EBDA		$	36

Volumetric data(b)
Gasoline(c)		940		892
Diesel fuel		369		379
Jet fuel		242		175
Total refined product volumes		1,551		1,446
Crude and condensate		486		507
Total delivery volumes (MBbl/d)		2,037		1,953

Certain Items affecting Segment EBDA

(a)Includes Certain Item amount of $15 million in 2021 as an increase in expense related to an environmental reserve adjustment.

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-month periods ended March 31, 2022 and 2021:

Three Months Ended March 31, 2022 versus Three Months Ended March 31, 2021


	Adjusted Segment EBDA
	2022		2021		increase/(decrease)
West Coast Refined Products	$	137	$	110	$	27
Southeast Refined Products	73		65		8
Crude and Condensate	89		88		1

Total Products Pipelines	$	299	$	263	$	36

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-month periods ended March 31, 2022 and 2021:

$27 million (25%) increase in West Coast Refined Products was primarily due to (i) increased earnings on Calnev Pipe Line LLC (Calnev), Pacific operations (SFPP) and West Coast terminals driven by higher revenues resulting from higher volumes; and (ii) a gain on sale of land at Calnev;
$8 million (12%) increase in Southeast Refined Products was primarily due to higher earnings at our Transmix processing operations primarily due to higher prices and volumes; and
Crude and Condensate had higher revenues of $223 million, with corresponding increases in cost of sales, resulting from increased marketing activities.

Terminals


	Three Months Ended March 31,
		2022			2021
		(In millions, except operating statistics)
Revenues		$	430		$	420
Operating expenses		(199)			(197)
(Loss) gain on divestitures and impairments, net		(3)			1
Other income		4			—
Earnings from equity investments		4			3
Other, net		2			—
Segment EBDA		238			227
Certain Items		—			—
Adjusted Segment EBDA		$	238		$	227

Change from prior period		Increase/(Decrease)
Adjusted Segment EBDA		$	11

Volumetric data(a)
Liquids leasable capacity (MMBbl)		78.9			79.0
Liquids utilization %(b)		92.3		%	95.1		%
Bulk transload tonnage (MMtons)		13.0			10.9

Other

(a)Volumes for acquired pipelines are included for all periods. Volumes for facilities divested, idled and/or held for sale are excluded for all periods presented.

(b)The ratio of our tankage capacity in service to tankage capacity available for service.

Below are the changes in Adjusted Segment EBDA in the comparable three-month periods ended March 31, 2022 and 2021:

Three Months Ended March 31, 2022 versus Three Months Ended March 31 2021


	Adjusted Segment EBDA
	2022		2021		increase/(decrease)
Gulf Central	$	32	$	19	$	13
Mid Atlantic	21		16		$	5
Marine operations	38		42		$	(4)
Northeast	22		26		$	(4)
All others (including intrasegment eliminations)	125		124		$	1
Total Terminals	$	238	$	227	$	11

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-month periods ended March 31, 2022 and 2021:

$13 million (68%) increase in the Gulf Central terminals was primarily due to higher revenues resulting from contractual rate escalations and higher volumes for petroleum coke handling activities, owing largely to refinery outages in the 2021 period associated with the February 2021 winter storm, higher revenues due to increased coal volumes and lower property tax expense at Battleground Oil Specialty Terminal Company LLC in 2021; and
$5 million (31%) increase in the Mid Atlantic terminals was primarily due to higher handling rates and coal volumes at our Pier IX facility; partially offset by,
$4 million (10%) decrease in Marine operations was primarily due to lower average charter rates partially offset by higher fleet utilization; and
$4 million (15%) decrease in the Northeast terminals was primarily driven by decreased revenues associated with lower utilization and rates on re-contracted tank positions at our Carteret and Perth Amboy facilities.

CO**2


	Three Months Ended March 31,
		2022		2021
		(In millions, except operating statistics)
Revenues		$	305	$	229
Operating expenses		(125)		49


Earnings from equity investments		11		8

Segment EBDA		192		286
Certain Items(a)		16		5
Adjusted Segment EBDA		$	208	$	291

Change from prior period		Increase/(Decrease)
Adjusted Segment EBDA		$	(83)

Volumetric data
SACROC oil production		19.3		19.4
Yates oil production		6.8		6.1
Katz and Goldsmith oil production		1.9		2.6
Tall Cotton oil production		1.0		0.9
Total oil production, net (MBbl/d)(b)		29.0		29.0
NGL sales volumes, net (MBbl/d)(b)		9.4		8.8

CO2 sales volumes, net (Bcf/d)		0.4		0.4
Realized weighted average oil price ($ per Bbl)		$	66.90	$	51.05
Realized weighted average NGL price ($ per Bbl)		$	43.68	$	20.14

Certain Items affecting Segment EBDA

(a)Includes Certain Item amounts of $16 million and $5 million decreasing revenue in 2022 and 2021, respectively, related to non-cash 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-month periods ended March 31, 2022 and 2021:

Three Months Ended March 31, 2022 versus Three Months Ended March 31, 2021


	Adjusted Segment EBDA
	2022		2021		increase/(decrease)
Oil and Gas Producing activities	$	142	$	235	(93)
Source and Transportation activities	62		56		6

Subtotal	204		291		(87)
Energy Transition Ventures	4		—		4
Total CO2	$	208	$	291	$	(83)

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-month periods ended March 31, 2022 and 2021:

$93 million (40%) decrease in Oil and Gas Producing activities was primarily due to higher operating expenses of $153 million driven by the benefit realized in the 2021 period from returning power to the grid by curtailing oil production during the February 2021 winter storm partially offset by higher realized crude oil and NGL prices which increased revenues by $60 million; and
$6 million (11%) increase in Source and Transportation activities primarily due to increase in revenues related to higher CO2 sales 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 CO2 business segment hedges outstanding as of March 31, 2022.


	Remaining 2022		2023		2024		2025		2026
Crude Oil(a)
Price ($ per Bbl)	$	61.32	$	58.92	$	58.07	$	58.84	$	64.98
Volume (MBbl/d)	25.13		17.80		11.20		6.65		1.60
NGLs
Price ($ per Bbl)	$	54.07	$	75.61
Volume (MBbl/d)	4.56		0.45
Midland-to-Cushing Basis Spread
Price ($ per Bbl)	$	0.53
Volume (MBbl/d)	23.65

(a)Includes West Texas Intermediate hedges.

DD&A, General and Administrative and Corporate Charges, Interest, net and Noncontrolling Interests


	Three Months Ended March 31,				Earnings increase/(decrease)
	2022		2021
	(In millions, except percentages)
DD&A (GAAP)	$	(538)	$	(541)	$	3	1	%

General and administrative (GAAP)	$	(156)	$	(156)	$	—	—	%
Corporate benefit	11		8		3		38	%
Certain Items	—		—		—		—	%
General and administrative and corporate charges(a)	$	(145)	$	(148)	$	3	2	%

Interest, net (GAAP)	$	(333)	$	(377)	$	44	12	%
Certain Items(b)	(44)		(6)		(38)		(633)	%
Interest, net(a)	$	(377)	$	(383)	$	6	2	%






Net income attributable to noncontrolling interests (GAAP)	$	(17)	$	(16)	$	(1)	(6)	%
Certain Items(c)	—		—		—		—	%
Net income attributable to noncontrolling interests(b)	$	(17)	$	(16)	$	(1)	(6)	%

Certain items

(a)Amounts are adjusted for Certain Items.

(b)2022 and 2021 amounts include decreases in interest expense of $40 million and $2 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, primarily related to our floating-to-fixed

LIBOR interest rate swaps which are not designated as accounting hedges, and decreases of $4 million in each period related to non-cash debt fair value adjustments associated with acquisitions.

General and administrative expenses and corporate charges adjusted for Certain Items decreased $3 million in 2022 when compared to 2021 primarily due to higher capitalized costs of $9 million reflecting higher capital spending and $5 million of lower environmental expenses partially offset by $5 million of higher employee labor and travel 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 decreased $6 million in 2022 when compared to 2021 primarily due to lower long-term average interest rates and long-term debt balances, partially offset by higher LIBOR 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 March 31, 2022 and December 31, 2021, approximately 8% and 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. For more information on our interest rate swaps, see Note 5 “Risk Management—Interest Rate Risk 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 March 31, 2022 was approximately $194 million as compared with tax expense of $351 million for the same period of 2021. The $157 million decrease in tax expense is due primarily to higher pre-tax book income in the 2021 period, partially offset by the release of a valuation allowance related to our investment in NGPL Holdings in 2021.

Liquidity and Capital Resources

General

As of March 31, 2022, we had $84 million of “Cash and cash equivalents,” a decrease of $1,056 million from December 31, 2021. Additionally, as of March 31, 2022, we had borrowing capacity of approximately $3.6 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 $1,084 million and $1,873 million in the first three months of 2022 and 2021, respectively. The period-to-period decrease 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.

Our board of directors declared a quarterly dividend of $0.2775 per share for the first quarter of 2022, a 3% increase over the dividend declared for the previous quarter. We expect to fully fund our dividend payments as well as our discretionary spending for 2022 without funding from the capital markets.

On February 23, 2022, EPNG issued in a private offering $300 million aggregate principal amount of 3.50% senior notes due 2032 and received net proceeds of $298 million after discount and issuance costs.

During the first quarter, upon maturity, we repaid EPNG’s 8.625% senior notes, our 4.15% corporate senior notes, and the 1.50% series of our Euro denominated debt.

Short-term Liquidity

As of March 31, 2022, our principal sources of short-term liquidity are (i) cash from operations; and (ii) our combined $4.0 billion of credit facilities and associated commercial paper program. The loan commitments under our credit 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 facilities and letters of credit reduce borrowings allowed under our $3.5 billion credit facility. We provide for liquidity by maintaining a sizable amount of excess borrowing capacity under our credit facilities and, as previously discussed, have consistently generated strong cash flows from operations.

As of March 31, 2022, our $3,324 million of short-term debt consisted primarily of senior notes that mature in the next twelve months. We intend to fund our debt, as it becomes due, primarily through 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, 2021 was $2,646 million.

We had working capital (defined as current assets less current liabilities) deficits of $3,417 million and $1,992 million as of March 31, 2022 and December 31, 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 $1,425 million unfavorable change from year-end 2021 was primarily due to (i) a $1,056 million decrease in cash and cash equivalents which includes $1,190 million related to repayments of senior notes that matured in the first quarter of 2022 using cash on hand; (ii) net unfavorable short-term fair value adjustments on derivative contracts of $430 million; (iii) a $387 million increase in senior notes that mature in the next twelve months; and (iv) a $290 million increase in commercial paper borrowings; partially offset by (i) a $257 million increase in restricted deposits related to our derivative activity; (ii) a $202 million decrease in accrued interest; (iii) a combined $105 million favorable change in our accounts receivables and payables; and (iv) a $68 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.

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 which 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 which 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 maintenance/sustaining or as expansion capital expenditures 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 three months ended March 31, 2022, and the amount we expect to spend for the remainder of 2022 to sustain our assets and grow our business are as follows:


	Three Months Ended March 31, 2022		2022 Remaining		Total 2022
	(In millions)
Sustaining capital expenditures(a)(b)	$	125	$	784	$	909
Discretionary capital investments(b)(c)(d)	206		1,257		1,463

(a)Three months ended March 31, 2022, 2022 Remaining, and Total 2022 amounts include $10 million, $112 million, and $122 million, respectively, for sustaining capital expenditures from unconsolidated joint ventures, reduced by consolidated joint venture partners’ sustaining capital expenditures. See table included in “Non-GAAP Financial Measures—Supplemental Information.”

(b)Three months ended March 31, 2022 amount excludes $101 million due to decreases in accrued capital expenditures and contractor retainage and net changes in other.

(c)Three months ended March 31, 2022 amount includes $15 million of our contributions to certain unconsolidated joint ventures for capital investments.

(d)Amounts include our actual or estimated contributions to 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, 2021 in our 2021 Form 10-K.

Commitments for the purchase of property, plant and equipment as of March 31, 2022 and December 31, 2021 were $283 million and $209 million, respectively. The increase of $74 million was primarily driven by capital commitments related to our Natural Gas Pipelines and Products Pipelines business segments.

Cash Flows

Operating Activities

Cash provided by operating activities decreased $789 million in the three months ended March 31, 2022 compared to the respective 2021 period primarily due to:

an $840 million decrease in net income resulting from the benefit recognized in the 2021 period for largely nonrecurring earnings related to the February 2021 winter storm (see discussion above in “—Results of Operations”); partially offset by,
a combined $83 million net impact of the certain non-cash items consisting of a $206 million gain from the sale of a partial interest in our equity investment in NGPL Holdings LLC, partially offset by a $117 million write-down of a related party note receivable from Ruby, both in the 2021 period, and a $6 million increase in gains on divestitures and impairments, net in the 2022 period over the 2021 period. See Note 2 “Investments” to our consolidated financial statements for further information regarding the sale of an interest in NGPL Holdings LLC and write-down of note receivable from Ruby.

Investing Activities

Cash used in investing activities increased $501 million for the three months ended March 31, 2022 compared to the respective 2021 period primarily attributable to:

a $413 million decrease in cash due to $413 million of net proceeds received from the sale of a partial interest in our equity investment in NGPL Holdings in the 2021 period; and
a $140 million increase in capital expenditures reflecting an overall increase of expansion capital projects in the 2022 period over the comparative 2021 period; partially offset by,
a combined $43 million increase in cash in distributions received from equity investments in excess of cumulative earnings and lower contributions to equity investees in the 2022 period compared with the 2021 period.

Financing Activities

Cash used in financing activities decreased $277 million for the three months ended March 31, 2022 compared to the respective 2021 period primarily attributable to:

a $299 million net decrease in cash used related to debt activity as a result of lower net debt payments in the 2022 period compared to the 2021 period.

Dividends

We expect to declare dividends of $1.11 per share on our stock for 2022. The table below reflects our 2022 dividends declared:


Three months ended	Total quarterly dividend per share for the period		Date of declaration	Date of record	Date of dividend



March 31, 2022	$	0.2775	April 20, 2022	May 2, 2022	May 16, 2022

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 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 2021 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 will 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), the parent issuer, Subsidiary 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 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 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 Report “Cross Guarantee Agreement, dated as of November 26, 2014, among Kinder Morgan, Inc. and certain of its subsidiaries, with schedules updated as of March 31, 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-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 March 31, 2022 and December 31, 2021, the Obligated Group had $30,695 million and $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	March 31, 2022		December 31, 2021
	(In millions)

Current assets	$	2,752	$	3,556
Current assets - affiliates	1,266		1,233
Noncurrent assets	61,294		61,754
Noncurrent assets - affiliates	508		508
Total Assets	$	65,820	$	67,051


Current liabilities	$	6,111	$	5,413
Current liabilities - affiliates	1,399		1,332
Noncurrent liabilities	30,595		32,310
Noncurrent liabilities - affiliates	1,012		1,047
Total Liabilities	39,117		40,102

Kinder Morgan, Inc.’s stockholders’ equity	26,703		26,949
Total Liabilities and Stockholders’ Equity	$	65,820	$	67,051


Summarized Combined Income Statement Information		Three Months Ended March 31, 2022
	(In millions)
Revenues		$	3,977
Operating income		906
Net income		568

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