Kinder Morgan (KMI) Q4 2022 Earnings Call Transcript

Kinder Morgan (KMI 0.40%)
Q4 2022 Earnings Call
Jan 18, 2023, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the quarterly earnings conference call. [Operator instructions] This call is being recorded. If you have objections, please disconnect at this time. I'll now turn the call over to Mr.

Rich Kinder, executive chairman of Kinder Morgan. Sir, you may begin.

Rich Kinder -- Executive Chairman

Thank you, Ted. And as usual, before we begin, I'd like to remind you that KMI's earnings released today and this call included forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and 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 disclosures 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. As we begin 2023, it seems to me an appropriate time to look both backward and forward.

Through the rearview mirror of today's earnings release, we see that 2022 was a very good year for Kinder Morgan. We again produced strong cash flow, well in excess of our budget, and use that cash flow to pay our investors a healthy and growing dividend, fund our expansion capex, maintain a strong balance sheet, and buy back shares on an opportunistic basis. In short, we are continuing to follow the financial philosophy that we have stressed for years. Looking forward, we released in December our preliminary budget for 2023, and it shows another year of living within our means, even in the light of increased interest costs and an expanded set of expansion capex opportunities which should drive nice growth in 2024 and beyond.

We also announced today our plan for management succession. Our CEO, Steve Kean, will transition out of his role effective on August 1st of this year. Let me just say that Steve has been a superb CEO for the last eight years, and we thank him for the dedication, the hard work, competence, and honesty he's brought to this job. On a personal note, he's been a real pleasure to work with during all his years at the company.

While we will be sorry to lose him as CEO, we are delighted that we have him in his present role until August. And that thereafter, he will continue to be a director. And I know he will contribute in that role to the future success of the company. The board and I have great faith in Kim Dang, who will transition from her present role as president into the CEO slot; and then Tom Martin, who will succeed her as president.

Both have been with Kinder Morgan for approximately 20 years. They have made extraordinary contributions to our results and culture, and we expect great things from them in the future. To sum it up, we expect a smooth transition later this year. Steve.

Steve Kean -- Chief Executive Officer

Thank you, Rich. I'll give you a brief look back at what we did in 2022 and how well we have set ourselves up for the future. Kim and David will cover the substance and the details of our performance, and then we'll take your questions. Next week, we have our comprehensive annual investor conference.

So, as usually is the case on this call, we will defer to next week the more detailed questions on the 2023 budget and the outlook and business unit performance. As Rich said, we had a very strong year in 2022 and wrapped it up with a great fourth quarter. Late in the fourth quarter, for example, we saw some volatility in the gas market, and that creates opportunity for large transmission and storage operators like us and for our customers who procure transportation and storage services from us. We performed well operationally for our customers, financially for our company, thanks, as always, for the tireless preparation and execution of our commercial, logistics, and operations teams.

We saw that come through, especially during the holiday weekend when our teams worked seamlessly across organizational lines to prepare, respond and recover, and deal with the upsets along the way. That requires a committed workforce and a strong culture, and we've got that at Kinder Morgan. Our work in 2022 also set us up well for the future. We added to the strength of our balance sheet, finishing the year at 4.1 times debt to EBITDA, better than our 4.3x budget for the year and well inside our long-term target of approximately 4.5 times.

We originated new business, which has grown our backlog to 3.3 billion, made up of high probability projects at an extremely attractive EBITDA multiple of about 3.4 times. These investments are weighted toward our lower carbon future, in natural gas, renewable liquid feedstocks and fuels in our products and terminals businesses, and investments in our energy transition ventures business. And these lower carbon investments are all expected to yield very attractive returns well above our cost of capital. That's how we told our investors we would approach these opportunities, and that's exactly what we are doing.

There are no loss leaders here. We also returned value to shareholders in the form of a well-covered, modestly growing dividend and additional share repurchases. For 2022 alone, we've returned nearly $2.9 billion to shareholders in declared dividends and share repurchases. On the share repurchases, we have used a little under $1 billion that the board authorized.

And now -- and the board has now upsized the total authorization from $2 billion to $3 billion. As always, those are the opportunistic repurchases when we use that capacity. Also, as we talked about throughout the year, we're starting to see nice uplift on our base business, on renewals in our natural gas business, and built-in escalators in some of our products and terminals, tariffs, and contracts. We are putting behind us the contract roll-off headwinds in our gas group.

Bottom line for investors, what we do today will be needed for decades to come. And as we are demonstrating in our products and terminals businesses, the assets we have today can accommodate the energy forms of the future. We are making the gradual pivot that the gradual energy evolution dictates. And we're doing it at attractive returns for our investors.

With the cash our businesses generate, we're maintaining a strong balance sheet; we are investing in projects at good returns, which adds to the value of the company; and we are returning the excess to our shareholders in the form of dividends and opportunistic share repurchases. We all appreciate Rich's comments at the beginning, and I'm grateful to Rich and the board for their support and confidence in us. I'm grateful to my 10,000 colleagues here who I've been proud to come to work with every day. And I'm grateful to you on the call who I've interacted with over the years.

I learned from you and benefited from your questions and perhaps your occasional criticisms and your ideas. Thank you. As you'll hear more about next week, we have our balance sheet in strong shape. We have a bright future with rich opportunities before us.

And most importantly, we have a great, experienced leadership team around this table who are always ready to step up. And all of our investors benefit from that. We look forward to seeing you in person at the conference next week. Kim.

Kim Dang -- President

Thanks, Steve. OK. I'm going to start with our natural gas business unit. Transport volumes on our natural gas pipelines increased by about 4% for the quarter versus the fourth quarter of '21.

We saw increased volumes from power demand and LDCs as a result of weather and coal retirements, and that was somewhat offset by reduced LNG volumes due to the Freeport outage and exports to Mexico as a result of third-party pipeline capacity added to the market. Physical deliveries to LNG facilities off of our pipes averaged approximately 5.4 million dekatherms per day. That's down about 450,000 dekatherms per day versus Q4 of '21, and that's due to the Freeport outage, and somewhat offset by increased deliveries to Sabine Pass. If we adjusted for the Freeport outage, LNG volumes would have increased approximately 5%.

Deliveries to power plants and LDCs were robust in the quarter, up approximately 7% and 13%, respectively, driven by the weather. Our natural gas gathering volumes were up 6% in the quarter, driven by Haynesville volumes, which were up 44%. Sequentially, volumes were flat. In our products segment, refined products volumes were down a little under 1% for the quarter, slightly outperforming the EIA, which was down 2%.

Road fuels were down 3%, but we saw a 10% increase in jet fuel demand. Crude and condensate volumes were down 6% in the quarter due to lower Bakken volume. Sequential volumes were down about 3%, and that was driven by lower HH volumes, that's a pipe coming out of the Bakken, due to unattractive locational pricing differentials. In our terminals business segment, our liquids utilization percentage, think about that as a percentage of our tank capacity contracted, remains high at 93%.

Excluding tanks out of service for required inspection, utilization is approximately 96%. Rates on liquids tanks renewals in Houston and New York Harbor were slightly lower in the quarter. Our tankers business was up nicely in the quarter as we benefited from both higher rates and higher utilization. On the bulk side, overall volumes were down 2%.

We saw increases in petcoke and coal volume, but that was more than offset by lower steel volume. In our CO2 segment, prices were up across the board. On the volume side, oil production was flat, but it's up 8% versus our budget. CO2 volumes were up 12%.

NGL volumes, which were much less impactful to results, were down 4%. Overall, both Steve and Rich have said, we had a fantastic quarter and year. For the quarter, DCF per share was up 13%; and for the full year, it was up 14% when you exclude the impact of Winter Storm Uri. We exceeded our full year planned DCF and EBITDA by 5% and DCF per share by 6%, coming in at or slightly above the numbers we have given you in the interim quarters.

This is an amazing year for a stable fee-based cash flow company like Kinder Morgan. For sure, we benefited from higher commodity prices, but our underlying business, especially natural gas, performed incredibly, and the fundamentals look strong for the future, which we will cover with you next week at the investor conference. With that, I'll turn it over to David.

David Michels -- Chief Financial Officer

All right. Thanks, Kim. So, for the fourth quarter of 2022, we're declaring a dividend of 27.75 cents per share, which is $1.11 per share annualized and up 3% from our '21 dividend. And I'll start with a few highlights: leverage, liquidity growth, and shareholder value.

There's some repetition here with earlier comments, but it's worth it. On leverage, we ended 2022 with the lowest year in net debt level since our 2014 consolidation transaction, and we have plenty of cushion under our leverage target of around 4.5 times. For liquidity, we ended 2022 with $745 million of cash on our balance sheet, in addition to our undrawn $4 billion worth of revolving capacity. Growth for full year 2022 versus '21, excluding the impacts from Winter Storm Uri, as Kim mentioned, we grew nicely.

On net income basis, we were up almost three times 2021. That's partially due to an impairment taken in 2021. And on EBITDA, we're up 10%; and on DCF per share, we're up 14% year over year. Very nice growth.

For shareholder value for full year 2022, we repurchased 21.7 million shares at an average price of $16.94 per share. And our board just authorized us to do more of that should the opportunity present itself. We're seeing healthy growth across our business, our balance sheet and liquidity are as strong as they ever have been, and we're creating shareholder value across the company in multiple ways. So, moving on to our quarterly performance, in the fourth quarter, we generated revenue of $4.6 billion, up 154 million from the fourth quarter of 2021.

Our net income was up -- was $670 million, up 5% from the fourth quarter of last year. And our adjusted earnings, which excludes certain items, was up 16% compared to the fourth quarter of '21. Our distributable cash flow performance was also very strong. Natural gas segment was up 11%, or $138 million, with growth coming from multiple assets.

Higher contributions from our Texas Intrastate systems, MEP, and EPNG; increased volumes on our KinderHawk system; and favorable pricing on our Altamont system. Those were partially offset by lower contributions from our South Texas gathering assets. The products segment was down $29 million, driven by higher operating expenses, as well as lower contributions from our crude and condensate business. And those were partially offset by increased rates across multiple assets, as well as strong volumes on our splitter system.

The terminals segment was flat to the fourth quarter of 2021, with slightly lower New York Harbor and Houston Ship Channel liquids refined product renewal rates, unfavorable impacts from the 2022 winter weather, and unfavorable property taxes, offset by greater contributions from our Jones Act tanker business, nonrecurring impacts from Hurricane Ida in 2021, and contributions from expansion projects placed in service, as well as other rate escalations that the segment experienced. Our CO2 segment is up $36 million from the fourth quarter of '21, driven mostly by favorable commodity prices. Our EBITDA was $1.957 billion, up 8% from last year; and DCF was $1.217 billion, up 11% from last year. Our DCF per share of $0.54 was up 13% from last year.

Turning now to the balance sheet, we ended the fourth quarter with $30.90 billion of net debt and a net debt to adjusted EBITDA ratio of 4.1 times. That's up from 3.9 times from year-end '21, but that's due to the nonrecurring EBITDA contribution from Winter Storm Uri we experienced in 2021. Excluding the Winter Storm Uri, EBITDA contribution at year-end 2021 ratio was 4.6 times. So, we ended the quarter and the year nicely favorable to the metric, excluding Uri -- excluding the Uri contribution.

We're also nicely below our long-term leverage target of around 4.5 times. And our net debt change for the full year of $278 million was driven by a number of things. So, here's a high-level reconciliation of that. Our DCF generated 4.97 billion.

We paid out 2.46 billion in dividends. We spent $1.1 billion on growth capital and JV contributions. We repurchased stock in the amount of $368 million. We made two renewable natural gas acquisitions for around $500 million.

And we received $560 million approximately from the sale of a partial interest in our Elba Liquefaction Company. Finally, we had a working capital use of around $825 million from several items, and that gets you close to the $278 million reduction in net debt year to date.

Kim Dang -- President

OK. Before we start on the questions, I am very excited about the opportunity I had. Now, a large part of my job is going to be about continuity. This is a great company and a great business with a great future.

As Steve said, our traditional business will be around for a long time to come. Energy is a $5 trillion global industry that is ingrained into every aspect of our lives. We'll continue to invest wisely in it as we position the company to turn slowly over time with the transition in a profitable manner. I'm also excited to work more directly with Tom.

We work well together and have complementary skills, which will help the company into the future. We have an experienced, cohesive senior management team with Dax and John and Anthony and [Inaudible] and David and Kevin and others sitting around this table, and we expect to make a seamless transition. 

Steve Kean -- Chief Executive Officer

All right. OK, Ted, let's open it up for questions. And as usual, we have a good chunk of our senior management team around the table. We'll make sure that you get a chance to hear from them as you have questions about their businesses specifically.

So, Ted, if you would open it up for questions.

Questions & Answers:

Operator

[Operator instructions] The first question in the queue is from Jeremy Tonet with J.P. Morgan. Your line is now open.

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

Hi, good afternoon. I just want to say congratulations to everyone. And, Steve, best of luck going forward. And maybe just starting off, I guess, with capital allocation, wondering if you could touch on any updated thoughts there.

Seems like the dividend uptick might have been a little bit less than we expected. And then at the same time, the share authorization levels were increased when it wasn't fully utilized before. So, just wondering, is this signaling any kind of shift in capital allocation or any other thoughts there on return to capital?

Steve Kean -- Chief Executive Officer

Yeah, I'll start. I mean, it doesn't imply any shift or change in approach at all. We look to maintain a strong balance sheet, as all four of us have said, and we look to fund projects at attractive returns. And as mentioned, we have some very good ones, 3.3 billion at a 3.4x EBITDA multiple.

Those add to the value of the firm. Those are attractive returns to us. But then we have -- we produced cash beyond that, and that cash takes the form -- it gets returned to shareholders in the form of a modestly growing and well-covered dividend and share repurchases. The capacity -- the reason for upsizing the capacity is not a change in terms of how we're thinking about it, opportunistic, as we've all said, and we've been saying for a long time, but we've used about 900 million since the original authorization, a little over 900 million.

And so, we'll be ready to take advantage of opportunities. We upsized the -- the board upsized the authorization. And so, we're in a position to take advantage of opportunities as they arise. But overall, bottom line, we haven't changed our capital allocation philosophy.

It's worked. It's been the same for quite a while, and it adds value for our shareholders.

Kim Dang -- President

Yeah, and on the dividend, what I would say is that, you know, it's important -- we believe it's important to increase the dividend when the company is growing and, you know -- but we do -- we are one of the top 10 dividend yield in the S&P 500. And so, we already have an attractive yield on the stock. And so, it's, you know, a small increase so that we continue to increase in terms of being good dividend-paying stocks, but also recognizing where the yield on the stock is.

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

Got it. Makes sense. That's helpful there. And then just want to shift to the weather impact in the quarter, if maybe you could unpack that a little bit more as far as pros and cons.

Were there any marketing uplift during the quarter? Just trying to see, I guess, what was the impact from the storm in the quarter.

Steve Kean -- Chief Executive Officer

Yeah, it's -- so look, we had uplift primarily in our natural gas assets, and that's attributable to what I said at the beginning, which is that, you know, when you have storage and transport capacity, particularly in this case, storage, where, Kim, I think, you know, the peak was 160 Bcf, and we had some supply degradation, this is a nationwide look, down to a little over 80 Bcf. The difference had to be made up with storage. And people who had those assets and had the capability were able to do well in those. The net, though, we did have some operational upside, some repairs we had to make, etc.

And so, we netted those out. And it's not -- the storm itself is not a huge incremental contributor, but it's on the order of $20 million or so when you net everything. But I think, just overall, experiencing the winter weather and the volatility that occurred in pricing both before and after that winter event, if you have storage and transport, you're able to take advantage of that, and we did.

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

Got it. That's helpful. And congrats, everyone, again.

Operator

Next question in the queue is from John McCarthy with Goldman Sachs. Your line is open.

Unknown speaker

Hey, everyone. Thank you for your time. Appreciate it. I wanted to talk maybe just a little more on some of the regional gas movements on the gathering side.

Can you just touch again on -- I think, Kim, you mentioned Haynesville volumes were flat quarter over quarter. Just wondering if you could comment on if that's producer-driven or takeaway issues. And then anything else you can share maybe on what you're seeing across the Rockies in terms of production. Thanks.

Tom Martin -- President, CO2 and Energy Transition Ventures

So, yes, the KinderHawk volumes were basically flat from quarter to quarter, but we do expect a nice uplift as we move into 2023. And that is it is largely capacity constraints both on our gathering system. We're spending some capital at 2023 to create some additional capability there. And then also as downstream capacity comes online as well.

So, we see some really nice opportunities to continue to grow on KinderHawk and then the Haynesville play overall. And that's not limited to just our gathering and processing opportunities, but we also see some nice Intrastate rate increase and utilization opportunities as we go forward. So, yes, a nice story. Haynesville is a nice place to work for us.

And as far as the Rockies, I mean, yeah, there's -- you know, we're not seeing a whole lot of growth there. There's a few pockets of green shoots and the DJ. But overall, you know, we're not seeing a great deal of growth there. Although, on our Altamont gathering system, we certainly -- the [Inaudible] we're seeing some nice growth there and expect that to grow as we go into 2023 as well.

Unknown speaker

Great. Thanks for that. Maybe just shifting gears to the Red Cedar announcement. Curious on how much else could be out there in terms of, you know, shifting away from, I guess, what we would call natural CO2 sources to kind of recovered CO2? I mean, how much of the mix of your overall CO2 kind of EOR business, either your own or selling to third parties, could these recoveries end up making up over time?

Steve Kean -- Chief Executive Officer

Anthony.

Anthony Ashley -- Vice President and Treasurer

Yeah. So, the Red Cedar deal that you're talking about, that's up to 20 a day. Put it into context, you know, we're currently moving over 900 a day now in our Cortez Pipeline to West Texas. And so, there's a ways to go before effectively that those natural resources get replaced.

Really, when you're talking about opportunities around kind of the Permian and the infrastructure there, that's largely gas processing assets, which are going to be lower. And so, with regards to, I guess, replacement of our existing source capacity, it would be a very long time before that would be replaced.

Unknown speaker

All right. We'll see if we go one for next week. Thanks for the time and congrats, everyone, on the new roles.

Operator

Next question is from Jean Ann Salisbury with Bernstein. Your line is now open.

Jean Salisbury -- AllianceBernstein -- Analyst

Hi. Can you remind us where Kinder Morgan is on rate case settlements? Which ones have been settled and are incorporated into 2023 guidance? And which pipes, if any, could still see rate cases this year or next?

Tom Martin -- President, CO2 and Energy Transition Ventures

Really, we're passed the big ones for now. I mean, we've got, you know, NGPL, EPNG. Those are big once for now. The Rockies pipes.

I'm saying this over the context of the last year, those are the big ones that have been addressed. And so, we're pretty clear now for 2023, and that's all been baked into our budget for 2023.

Jean Salisbury -- AllianceBernstein -- Analyst

OK. Thank you. And then what's the latest on El Paso restart? I think you had a release that noted some positive progress last week.

Steve Kean -- Chief Executive Officer

Yes. And so, you know, our information on this is going to be consistent with and stick closely with what we post on the EPNG electronic bulletin board. And so, we did post an update there. And what it says is that we anticipate completing the physical work online 2000 -- before the end of January, and then we will submit a request to PHMSA on behalf of EPNG to lift the pressure restriction and return to normal commercial service.

So, PHMSA will need time to review the information that we provide. But our work, we expect to be completed by month end.

Jean Salisbury -- AllianceBernstein -- Analyst

Great. That's all. That's all for me. And congrats to you, Kim, and thank you, Steve, for all the time and thoughtful answers over the years.

Best of luck.

Steve Kean -- Chief Executive Officer

Thank you.

Operator

Next question is from Spiro Dounis with Citi. Your line is now open.

Spiro Dounis -- Citi -- Analyst

Thanks, operator. Good afternoon, everybody. Congrats all around. And, Steve, I can't believe you're willing to walk away from the dollar-a-year salary.

It must have been a tough choice to make.

Steve Kean -- Chief Executive Officer

It was a hard choice.

Spiro Dounis -- Citi -- Analyst

Congrats. Two-part question on my first one here, just along the Permian pipeline. First part, just between GCX and Permian Pass, curious if one of those is kind of in the front of the queue and if maybe it would make more sense to kind of bring Permian Pass back up to the front. In second quarter -- I believe last quarter -- last quarter, you mentioned the possibility of maybe phasing the Permian Highway expansion in over time.

I think you needed to do more engineering work to figure out if that was feasible. Just curious if there's an update you could share on that.

Tom Martin -- President, CO2 and Energy Transition Ventures

Yes, so I think you mean Permian Pass, right, not Permian Highway. So, the Permian Highway expansion is under construction, and expect that expansion to go into service in November. You know, we're really working on two other opportunities. As you noted, one is GCX expansion.

That hasn't been very active. Although with lower gas prices now, there may be some opportunities there. As you recall, fuel cost was a bit of a headwind for us on that expansion project. So, again, as pipe gas prices are lower, that may bring that one more into an actionable opportunity.

But as far as Permian Pass, you know, really, I think what we are hearing from our customers is that the next need for incremental capacity out of the basin is sometime in late 2026, maybe early '27. And so, as we, you know, work with our producer customers and also align them with their desired customer, which I think largely are going to be LNG related along the Gulf Coast, it helps -- you know, we need to figure out exactly where and when those volumes need to be there. So, I think that's still out there. The overall market still needs that capacity, but nothing really new to announce as far as anything that we're going to accelerate at this time.

I think the PHP [Technical difficulty]

Steve Kean -- Chief Executive Officer

There was some discussion last time about when we put our compression in, once we get pretty close to the end, there's already [Inaudible] a little bit of capacity that's available before the November in-service date. And so, I assume that there's a way going.

Tom Martin -- President, CO2 and Energy Transition Ventures

Still exploring that. And I think that is a potential opportunity as we move through 2023.

Spiro Dounis -- Citi -- Analyst

OK. Got it. Perfect. Thanks for the color on that.

Second question, maybe for David, just maybe an update on how you're thinking about maturities and the overall interest rate exposure for 2023 and beyond. Just kind of curious what options are available to you to have or perhaps maybe exceed the DCF budget by outperforming on interest expense?

David Michels -- Chief Financial Officer

So, we'll continue to evaluate different alternatives. We'll talk more about this next week. But we've locked in some of our floating rate exposure for 2023 in order to reduce some of the downside risks for the year. But with regard to the overall maturities, we do expect to access the debt capital markets during the year 2023 in order to refinance, you know, the large amount of maturities that are coming due this year.

The $745 million of cash on the balance sheet coming into the year certainly helps with that. And we've got, you know, $4 billion worth of revolving capacity. So, as I said last quarter, and this is still the case, we will wait for favorable market conditions before we access the market, and we have the luxury of being patient.

Spiro Dounis -- Citi -- Analyst

Understood. Appreciate the time, guys. See you next week.

Operator

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

Michael Blum -- Wells Fargo Securities -- Analyst

Thank you. Congratulations, everyone. Steve, we will miss you, and I'm glad you came to our conference this year. So, thank you for that.

I wanted to ask back on the Red Cedar CCUS project. Just wondering if you could talk about what type of return you expect to generate on a project like that, and just to confirm that this will be entirely fee-based from your perspective.

Anthony Ashley -- Vice President and Treasurer

Yeah. I mean, they -- we're not going to talk specifics on returns, but I know they're very comparable with our traditional businesses. So, you know, we're doing the right things from a return standpoint. And I'm sorry, the second question.

Kim Dang -- President

The commodity [Inaudible]

Anthony Ashley -- Vice President and Treasurer

Oh, yeah. So -- and this is primarily on the ETP side of things, and maybe Tom wants to talk about the Red Cedar JV part of it, but ETP will have minimum volume commitments in place on that transaction.

Tom Martin -- President, CO2 and Energy Transition Ventures

And on the Red Cedar side of it, it's GMP volume. So, there's a variable component to that. But the volumes have been growing and expect them to continue to grow.

Steve Kean -- Chief Executive Officer

This is a good opportunity for us. CCUS is going to have to be part of the solution over the long term. And we have the capability to transport it and put it in the ground and keep it in the ground. And so, there's a good longer-term opportunity there.

And this is a highlight that you can do these things and you can do them economically. And so, we're happy about this transaction. It's the first, we hope, of many, but there are a number of things that have to be worked out. I think the biggest is getting Title VI permitting for the sequestration through the EPA or having that authority delegated in Texas and Louisiana and other places so that we can speed up the permitting process.

Anthony and the team have found a way to use a different kind of permit in a different kind of, well, situation to enable us to do this. And there may be more of those to do as well. But this is a sign of things to come, we hope and believe, but it is dependent upon an accelerated permitting process from the EPA.

Michael Blum -- Wells Fargo Securities -- Analyst

Got it. I appreciate all that. Second question I just want to ask was on the lower gasoline and diesel volumes year over year. Can you maybe just talk to what you're seeing there? I know your overall volumes were, I think, a little better than overall industry averages, but just kind of what's driving that? And do you think this is sort of a recurring pattern that we're going to see throughout the year? Thanks.

Steve Kean -- Chief Executive Officer

Yeah. Yeah, I'd say a couple of things. So, first of all, you know, we had one operational issue in December that, you know, as Kim mentioned, we were down 0.7% compared to the prior year. We had one of our major lines in California, the one that serves San Diego, down for 12 days.

And if that hadn't been down, we would be back up to close to flat, the sort of quarter over quarter. And so, you know, looking at 2023 and where we stand right now, and we'll get into the budget more next week, we're budgeting an increase of about 3.4% in aggregate. For gasoline, we're looking at something below that. But for jet fuel and diesel together, we're looking at something above that, close to 6.5%.

But if you look at, you know, starting with kind of jet fuel, recall, we've been slower to recover in jet fuel than the EIA given our weighting toward international flights. EIA, for the quarter, was down about 14% to 2019, whereas -- I'm sorry. Yeah, it was down 10% to 2019, whereas we were down 14. So, we still got a better recovery on the jet fuel front to close with the West and the rest of the country as we see international, particularly Asian flights, come back.

We think that'll help us. And recall, we've got our renewable diesel projects coming online on the West Coast at the end of the first quarter. And those have take-or-pay contracts for the north of 30,000 barrels a day. So, we think that that'll help with the diesel picture.

So, in looking at what we're seeing right now, midway through January, we seem to be, from a refined products perspective, on top of budget.

Michael Blum -- Wells Fargo Securities -- Analyst

Perfect. Thank you so much.

Operator

Next question is from Brian Reynolds with UBS. Your line is open.

Brian Reynolds -- UBS -- Analyst

Hi. Good afternoon, everyone, and congrats to you both, Steve and Kim. Maybe to start off on the Kinder base business, which performed pretty well in the quarter. And just wanted to talk a little bit about, you know, future growth opportunities there.

Over the past few years, we've just seen a lot of competitors come into the market looking to erode that Kinder market share on LNG supply, you know, from the Permian and Louisiana. I was just curious if you could talk, you know, broadly about, you know, how Kinder has a competitive advantage there and whether you guys see yourselves well-positioned for the new LNG supply prospects going forward or whether, you know, effectively the competition has, you know, made returns not attractive at this point. Thanks.

Tom Martin -- President, CO2 and Energy Transition Ventures

Yeah. So, I mean, I think, as we've said all along, that the proximity of our network along Texas, Louisiana, including our storage capabilities there, and that gives us a great advantage whether we're directly building into new LNG export facilities or serving, you know, other lines that are doing those connections. Just when you have access to as many basins as we do and as -- and the mix of both reservoir storage and salt storage that we have across our footprint, I think we're still in a great position to participate in the -- with the LNG export story. You know, we've talked about 50% as being our market share.

That's where we are today. We definitely believe our volumes are going to continue to grow, but it's hard to call balls and strikes on whether we're going to meet or exceed 50% going forward. But I feel really good about our position to participate in that whole growth story.

Steve Kean -- Chief Executive Officer

Yeah, and you'll see a little bit more of this, Brian. But, you know, what you're seeing when we have a backlog that's $3.3 billion and we're executing it at 3.4x EBITDA multiples is that our network is well positioned and we're able to make relatively modest capital-efficient investments in our grid to expand, to serve the supply and demand growth that we're seeing across the network. And so, that's -- you know, in the past, we had big, long haul projects that might have been done at a slightly higher multiple, still attractive returns. But I think this shows you the fact that we have dozens of projects that we're doing and at relatively modest capital expenditures each, but with really nice returns that we are finding that our network is extremely well positioned for the growth along it.

Brian Reynolds -- UBS -- Analyst

Great. Appreciate the color. And as my one follow-up, just wanted to get a little bit of an update on just the RNG projects and the capex that are progressing through 2023. You know, how are those projects progressing? And just as the RNG market starts to mature in the middle of the decade or end of the decade, curious if you, you know, continue to see new opportunities within that Kinetrex business and if you see continued capex for the next few years.

Thanks.

Anthony Ashley -- Vice President and Treasurer

Yeah. So, we have three of our original RNG projects that came through the Kinetrex acquisition that will be in service this year. And two of them really in the first half of this year. Those are done on an EPC contract.

So, you know, that capital is fully baked into our 2023 budget. And then with regards to future opportunities, you know, we've -- obviously, we've made three acquisitions to date. You know, I think we're looking to grow fairly organically at this point in time. I think there are opportunities out there to grow, and we'll be looking at those on an individual basis.

The EPA did come out with a very new proposal recently, which opens up a new demand market for us. And so, there may be some opportunities there to convert some of these assets into electric service as well. So, I think there's lots of different opportunities that we're looking at right now in that space. We're excited about growth.

Brian Reynolds -- UBS -- Analyst

Geat. I'll leave it there. I appreciate all the color and enjoy the rest of your evening. Thanks.

Operator

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

Keith Stanley -- Wolfe Research -- Analyst

Hi. Thank you and congrats to Kim and Steve as well. I wanted to start, Steve, you said the backlog is at 3.3 billion now, so that's up another 600 million or 700 million since last quarter, which presumably that's why the growth capex of 2.1 billion for this year was higher than what you kind of pointed to initially. Can you talk to any of the specific projects you've added since last quarter because it is a decent amount?

Steve Kean -- Chief Executive Officer

Yeah. So, we have some -- most of it is going to be in gas and in RNG. On a percentage basis, I think I can give you that, 64% is in gas and in RNG-related, maybe a little bit more than that, maybe. And so, this is -- it's a mix of power demand, LDC demand, LNG, transport, and GMP, and well connection.

As I said, you know, it's a collection of a lot of smaller projects and mostly build-offs of the existing network, which again makes them capital efficient. It reduces the execution risk on them, and it tends to give us -- we get as best return as we can that's available for the market. We tend to end up with better returns on the capital we deploy when that's the composition of the projects. So, yeah, 3.3 billion and again at 3.4x and kind of concentrated in our low carbon, including natural gas.

Kim Dang -- President

Yeah. And a number of the projects that got out of the backlog are in the other news like, you know, part of the Evangeline Pass Project, the TVA project, the terminals renewable diesel project. So, those are some of the projects that got added to the backlog in the quarter.

Keith Stanley -- Wolfe Research -- Analyst

Got it. Thanks. Separate question, just on the buybacks and how you're thinking about it for this year. So, it's a little bit more of a growth year in terms of spending in 2023.

So, your DCF is only a little bit above, I think, your capex and your dividends. So, when you think about buybacks, and obviously you're opportunistic, but would you be willing to increase debt or issue debt, more short-term borrowings in order to buy back stock if the opportunity was there since you're well under your leverage target for this year?

David Michels -- Chief Financial Officer

Yes, we would. We think about our capacity for buybacks or other opportunistic opportunities as being our balance sheet capacity, as well as the excess cash that we generate in the current year. And so, we would be willing to increase our leverage a little bit. But we'll be really cautious around it.

We'll measure it and make sure that we're being -- we're using that capacity in an appropriate manner. But that is the way that we think about our available capacity.

Keith Stanley -- Wolfe Research -- Analyst

Thank you.

Operator

The next question is from Neal Dingmann with Truist Securities. Your line is now open.

Neal Dingmann -- Truist Securities -- Analyst

Afternoon. You all [Inaudible] mostly. I'm just -- my question is around, first, on the renewable diesel, specifically, just what future opportunities you see there beyond the cars in terms of that committed projects, and you touched around this as well. Maybe the second question just hit this now as well, just the same thing on opportunities you see around the CCUS.

Steve Kean -- Chief Executive Officer

Yeah. So, Dax, if you'll comment on the RD part of it; and John, if you'll talk about the upstream, the feedstock part of it as well.

Dax Sanders -- Executive Vice President and Chief Strategy Officer

Yes. So, just to comment, I mean, as we've said before, you know, right now, every drop of renewable diesel in the United States wants to go to California. I think we expect that as additional state governments layer on a third level of the tax credit, similar to the one that California has, and other states have them, Oregon, Washington, British Columbia, that there will be more enthusiasm for projects there. We've got terminals there.

We are having conversations with people. And so, I think that's probably -- other areas in the West Coast are probably next places to potentially develop. And then, you know, certainly, with the two hubs that we're developing in both northern and Southern California, I think there are additional opportunities to potentially expand those. So, that's the majority of it from the refined products perspective.

Steve Kean -- Chief Executive Officer

OK. On feedstocks.

John Schlosser -- Vice President and President of Terminals of the Kinder Morgan, Inc.

Sure. I mean, what we said last year when we announced and that's the idea that we felt that all boats would rise and those created a number of opportunities to high-grade our assets, high-grade our customers at Harvey, bring additional products and their raise rates. But it has also attracted other customers. And this is what we hope is the second of many projects we'll be looking.

Great opportunity to connect with a neighboring facility that's involved in an expansion project where we'll be handling all the feedstocks into the facility under a long-term 10-year take or pay. The other area to actually help us, too, is on our Jones Act vessels. And we've seen a lot of movement as it relates to renewable diesel from the Gulf Coast to the West Coast and interest in that which we think will further tighten an already tight Jones Act market.

Neal Dingmann -- Truist Securities -- Analyst

Great answers. Thanks for the time, guys.

Operator

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

Rich Kinder -- Executive Chairman

OK. Thank you very much, everybody. Have a good evening. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Rich Kinder -- Executive Chairman

Steve Kean -- Chief Executive Officer

Kim Dang -- President

David Michels -- Chief Financial Officer

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

Unknown speaker

Tom Martin -- President, CO2 and Energy Transition Ventures

Anthony Ashley -- Vice President and Treasurer

Jean Salisbury -- AllianceBernstein -- Analyst

Spiro Dounis -- Citi -- Analyst

Michael Blum -- Wells Fargo Securities -- Analyst

Brian Reynolds -- UBS -- Analyst

Keith Stanley -- Wolfe Research -- Analyst

Neal Dingmann -- Truist Securities -- Analyst

Dax Sanders -- Executive Vice President and Chief Strategy Officer

John Schlosser -- Vice President and President of Terminals of the Kinder Morgan, Inc.

More KMI analysis

All earnings call transcripts