Wells Fargo-- KMI released its preliminary 2022 financial budget. On the whole, KMI’s financial outlook for next year is slightly below our forecast with some puts and takes—EBITDA is in line (but slightly below after adjusting for commodity prices), DCF is lower, and growth capex is higher. The company’s capital return expectations for 2022 are tracking ahead of our forecast. KMI expects to grow its dividend to $1.11/share (3% annual growth) in 2022, in line with our forecast. However, management has earmarked up to $750MM for share repurchases in 2022, which is in excess of our forecast of $300MM. Finally, KMI expects to end 2022 with leverage (excluding buybacks) of 4.3x, slightly above our estimate of 4.2x.
EBITDA & DCF Slight Misses. For 2022, KMI expects to generate $7.2B of EBITDA, which is in line with our estimate and above Consensus of $7.0B. Management’s guidance assumes an oil price of $72.50/Bbl, which is ~$10/Bbl higher than our forecast. KMI benefits from $8.7MM for every $1/Bbl of oil price. Hence, our 2022 EBITDA forecast would have been $7.3B using KMI’s oil price deck versus guidance of $7.2B. KMI’s preliminary DCF/share forecast of $2.07 is below our estimate of $2.15 presumably due to higher than forecasted interest expense or maintenance capex. KMI expects to invest $1.3B in expansion capex in 2022, slightly above our estimate of $1.2B.
Our Call Capital Return Plan Looks Promising. KMI plans to grow its dividend by 3% in 2022, in line with our forecast. The company also intends to repurchase up to $750MM of shares (2% of float adjusted market cap), which is well in excess of our 2022 estimate of $300MM (1%). That being said, this is a maximum buyback amount (to be executed opportunistically) rather than a concrete target.
Last year, KMI’s budget included authorization to repurchase up to $450MM of stock. However, KMI has repurchased no shares year to date, opting instead to redeploy excess cash flow (including windfall profits from Winter Storm Uri) into the Stagecoach acquisition and the balance sheet.