Welcome to the Quarterly Earnings Conference Call. At this time, all lines are in a listen-only mode for the duration of today's conference. This call is being recorded, if you have any objections, please disconnect at this time. Today's call will feature a question-and-answer session. [Operator Instructions] Now, I will turn the call over to Mr. Rich Kinder, Executive Chairman of Kinder Morgan. Sir, you may begin.

Okay. Thank you, Jeremy, and welcome to our second quarter call. As usual, we may be making statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. I'll give a brief overview, then Steve Kean, our CEO, will talk about the quarter's performance and give you an update on our project backlog, and then, as usual, Kim Dang, our CFO will give you all the financial details and then we will take any and all questions that you may have. We raised the dividend to $0.49 for the second quarter. We're on track to meet our target of delivering -- of declaring $2 for full year 2015 with substantial excess coverage, even after adjusting for the current commodity prices. And we expect to grow our dividends by 10% each year from 2016 through 2020. It's difficult to compare this quarter with the second quarter of 2014 because of course we completed our merger of all the Kinder Morgan entities only in November of last year. But that said, let me share what I believe are some relative numbers with you. In this quarter, we had approximately 2.2 billion shares outstanding versus about 1.034 billion in the second quarter a year ago. We declared a dividend of $0.49 versus $0.43 a year ago. We had DCF per share of $0.50 this quarter versus $0.32 a year ago. We had excess coverage in this quarter of $20 million versus a shortfall of about $113 million in the second quarter last year. And year-to-date for 2015, we've had excess coverage of $226 million versus $25 million for the first half of 2014. In terms of total DCF, in this quarter, we had 1.095 billion versus 332 million in 2014. Very importantly, we've increased substantially our backlog of future projects, as Steve will explain and we think we're looking at a bright future for natural gas demand. As an example of the increasing demand, the power generation throughput on our set of natural gas pipelines was up 16% for the first quarter -- for the second quarter compared with second quarter of 2014. I might add anecdotally, that's pretty consistent. In Texas, the overall demand for gas as a source of power generation increased its share year-to-date to 48% from 37% in the first half of 2014. I think all of these factors and the numbers I've shared with you just demonstrate our belief that the strength of our assets, even in times of volatile and relatively low commodity prices, continue to demonstrate that we can produce stellar results even in these times. With that, I'll turn it over to Steve.

All right, thanks, Rich. So, I'll take the projects for you and give you some operating highlights from the segment. Since the April update our project backlog increased by $3.7 billion from $18.3 billion to $22 billion. That's great progress and a sign of the strength of our network and the continuing need for additional midstream energy infrastructure. This was fixing to be an even bigger increase but for some delays on a couple of deals that we've been working on worth about another $1 billion. If and when we get those done, we'll announce those separately. Now, here are the main changes. We added $4.6 billion in new projects. And this is an important one, $3.3 billion of that is the addition of the market path portion of Northeast Energy Direct, a natural gas pipeline expansion to serve the New England market. We're expecting to proceed with that project. We're still working on the supply portion of that project. And we've made significant recent head way on that one, as well, but not to the point where we're ready to add it to the backlog. When and if we do, that would be another $1.6 billion to $2.1 billion. Now going back to the market path portion, we have discussed in previous releases that we've got commitments for 562 a day of capacity on that project. Much of that volume is currently going through the state Public Utility Commission review process and we're optimistic about the outcome of those reviews. We're comfortable going forward, based on the commitments we have and the progress toward the state approvals on those commitments. Number two, our confidence that we can extract value for short-term sales of a portion of the unsold capacity, particularly during the winter months. And third, just the overwhelming…

Sure. Thanks, Steve. Turning to the first page of numbers which is the GAAP income statement, let me just point out a couple of things on this page. You can see that in the quarter, similar to last quarter, revenues are down significantly $474 million. But you can also see that OpEx is down by almost the exact same amount, $475 million. As I said last quarter, a change in revenues is not a good predictor of our performance. We have some businesses where revenues and expenses fluctuate with commodity prices, but margin generally does not. We believe that the best indicator of our performance is the cash that we generate, which metric we look at DCF per share and the cash that we pay our investors which is the dividend per share. So, with that I'll turn to the second page and look at DCF. DCF before certain items in the quarter, $1.095 billion, up $763 million or 230%. Now, that is largely a function of not paying the limited partners as a result of the Fusion transaction. But it doesn't take into account the shares that we had to issue, the approximately 1.1 billion shares that we had to issue in the transaction. So, if you look at it on a per share basis, it takes into account both aspects of the transaction, and so we generated DCF in the quarter of $0.50, that's up $0.18 or 56% from the second quarter a year ago and year-to-date DCF is $1.07, which is up 23% from the six months ended June 2014. So, our dividend in this quarter of $0.49 gives us coverage of $20 million year-to-date and we have coverage -- the $1.07 covers the $0.97 dividend by $226 million and obviously, as Rich mentioned $20 million in…

Good. We'll take any questions you might have. Jeremy, if you'll come back on we'll open it up for questions.

Thank you. [Operator Instructions] Our first question is from Christine Cho from Barclays. Your line is open.

Good afternoon.

Hi Christine. How are you?

Good. How are you?

Good.

So, we've had some M&A attempts and announcements in recent weeks, one of which was an unsolicited bid. With talks about bid-ask being too wide and maybe some companies not even thinking about putting themselves up for sale, would an unsolicited bid and maybe even going public with such an offer if any potential targets said no be something on the table for you guys? Just asking because you guys did make an unsolicited bid for El Paso on the heels of the KMI IPO back several years ago. So, there is some history there but wondering if anything has changed on your side or if you even think anything out there is worth the trouble.

Christine, that's just so hard to project into in advance. All acquisitions are very circumstance-specific. And we wouldn't sit here and categorically say -- clearly, and even in the El Paso case, we've done deals on an agreed to or negotiated basis, we would never say categorically that we wouldn't do it any other way. But it's just too circumstance-specific for us to give you a definitive answer on that. Dax, do you have anything you want to add to that?

No, I think it's something that - I would agree with your summary that bid offer spreads still do sort of exist in a lot of places. Obviously you've seen certain situations where there's been some movement and some deals getting done. And I think our thought is that -- at least my thought is that you'll probably see a little bit more activity in the second half this year than you've seen in a while. But I think Steve's point about not speculating on any tactic or certain situation is exactly the way we thought about it.

Okay, great. And then I thought I saw that Gulf LNG filed the FERC application last month. It's been fairly quiet with news on that front so was just curious what you were seeing on the customer contract side. Also, was the filing more of a check the box to have the regulatory side of things not be the bottleneck or was it something customers wanted to see you do before talking more seriously given the time it takes to receive approval?

You're right. We did that -- we filed on June 19th, I believe. And it is us continuing to advance that project. We continue to talk to customers about it. It is the last brownfield site that hasn't been put under contract. We think it is a promising location and in the long-term we're very bullish on U.S. LNG and where it fits. Clearly there's a pause that's been hit and there's a debate about how long that pause runs, what the real capacities are out there, and for how long the market might be somewhat oversupplied. But we think this is a good project and we're looking at it in a timeframe that's early the next decade. So, I think it fits well with what the market recovery might ultimately be shaped into. But, Christine, as you know, we don't have it in the backlog. We're working the customer piece of it, having active discussions, but nothing we can really report to you that's anywhere near definitive at this point.

Great. And then the last one for me, can you talk about the steps leading to Shell's decision to sell its equity interest of the Elba JV? Did you approach them; did they approach you, et cetera? Any color would be helpful.

Yes, we've been working together for a long time in developing this project. Costs have been increasing on it and scope has been adjusted. I'm not going to speak for Shell at all, but you don't need to be a rocket scientist to see that they bought BG, that the market outlook on LNG has changed a bit. They wanted to restructure the contract. We were certainly willing to restructure it on the terms that we got here and invest additional capital, $2.1 billion in total now, on the project at the return that we're getting for it. We got a different risk allocation. Shell is retaining certain risks. We are picking up certain risks, but the risks that we are comfortable dealing with in today's market environment for materials and construction services and the like. So, we think we can do this project and do it successfully. The added benefit, from our standpoint, as I think I mentioned, is that we get control now. This is not a two-headed thing anymore. We've got control over this project and its development and construction, and we'll get it built. And we're happy to have Shell as the customer on the facility and we're very happy to be in charge.

And we're happy to put more money into this project at returns that we think are very good, particularly given Shell credit for a 20-year contract.

And the next question is from Shneur Gershuni from UBS. Your line is open.

How are you doing?

Good. How are you?

Fine.

Just a couple quick questions. Steve, in your prepared remarks, you sort of talked about how much the backlog has actually grown. And some of it is the acquisition; some of it is projects that you've been talking about for some time. I was wondering if you can give us is some color. We're nine months into the commodity collapse. The E&P budgets from a CapEx perspective have been coming down for the last six months. How are the discussions about incremental ideas, concepts, logistics projects going at this point right now? Are things slowing down? Are some opportunities cropping up? I was wondering if you can give us some insight as to how you think the backlog would grow over the next 12 months beyond the projects that you're hoping to add to the backlog at this stage right now.

Okay. Well look first, broadly, clearly what affects our customers affects us. And so the backlog probably would have been growing even faster than it did in a different commodity price environment and it also affects a little bit who we're talking to. As I said before, we had seen a lot of producer push projects on the gas side. In particular, we started to see more market pull. Now, it's interesting, this time that 1.4 BCF of sign up is almost evenly divided -- almost, not quite -- across LDCs, producers and LNG. And so that's a little bit of a counter, I think, to what we have been seeing. But what affects our customers affects us. But we think it's a very positive sign that in this commodity price environment we're growing the backlog where we are. And like I said, we came up to the brink on even more additions which I think we'll still get a good chunk of and grow it from here. So, I think, just broadly, there are many moving pieces and many markets that we're serving and addressing and you have to kind of look at them individually to see where the opportunities are. We're still early stages of the really big demand pull. Beginning of next year we start to see LNG pull. We are seeing this year power demand pull. That 9% sales volume increase on the intrastates was really quite remarkable, I think, and shows you what we're seeing on industrial and power demand in the state of Texas. So things are -- and the 1.4 BCF of contract sign ups. Those things are showing you that even in a down market; our network is well-positioned for the places where there is growth. And so we still feel pretty…

Great. Just as a follow-up question I was wondering if we can talk about the balance sheet for a second, a two-part question. I understand your expectation to get to 5.6 times by the end of this year. Is the commitment to the rating agencies to get it to this year or is it during 2016? And then I was wondering if you can also talk about the warrant repurchase program. It seems counterintuitive to be buying back one side of the capital structure while issuing equity on the other. Just wondering if you can talk in context of the overall plan to de-lever.

Kim?

On the commitments of the rating agencies, this was in all of the materials at the time we did Project Fusion which was we were going to start out of the box at 5.6 times. We were going to remain elevated for a couple of years and that when the larger projects, Trans Mountain and Elba came on, that was the biggest driver of deleveraging over that period. So, that is still our expectation. And getting to 5.6 times at the end of the year is consistent with that, consistent with what we showed the rating agencies at the time of the transaction and consistent with what we budgeted and they saw in our projects when we published that in January. On the warrant repurchase, that is just when there are disconnects between where the shares are pricing and where the warrants are pricing. We think that there may be opportunities to buy those warrants. We evaluate that from time-to-time and when we see those opportunities then we'll execute on the warrant repurchase.

Great. Thank you very much, guys.

And the next question is from John Edwards of Credit Suisse. Your line is open.

Hey John, how are you doing?

Doing well. Good afternoon. Just a question for Steve. So, on Northeast Direct you indicated you've moved two-thirds of it now to the backlog. But if memory serves, the amount of commitments you've secured are about the same as it was last quarter. So, help me understand better what change that you're able to move that to backlog and you're in position to move forward with it.

Yeah, that's right, John, and it's really three things. One is those contracts; we've developed greater confidence around them as they're starting through their LDC approval process. Secondly, we looked hard at the project and as we were phasing the capacity in, sort of where would we have unsold capacity and what do we think we could do with that capacity, what value could we attribute to it. That's not under contract, that's based on our judgment that, because the demand is there and it's growing that we're going to be able to market some of that unsold capacity. We'll still be trying to actively sell it, of course, long-term, but we'll have good economic opportunities on some of the unsold capacity, particularly during the wintertime. So, we put that into our expectations. And then, finally, just the overwhelming need for the project overall, the demand. And frankly we think that getting out there with our customers, telling them that we're going forward is going to help in the additional sign ups that we need. It helps us get through the approval process, it helps us make the project concrete for the people who we want to get concrete with us in terms of signing up for long-term commitments. So, those are the things that improved our confidence quarter-over-quarter.

Okay. And then how did you factor in one of the major competing projects there into this calculus?

Okay, we have our eyes on our own homework here, basically. We're trying to fill this thing up with commitments. And whether the other guys get theirs done or not, we're tunnel vision on this. We're just focusing on our deals and getting those in. We think we have a very good project and that that project is properly located in size to serve New England markets and to attract our share, if you want to call it that, but certainly the most accessible power demand to that footprint. And so we have no commentary here at all on what that means about the other guy's project. We're fighting for this like it's a one-project deal and we'll continue to do so.

Okay, that's helpful. And just on the backlog, you did increase substantially and congrats on that. I guess did it move? How was that relative to your expectations? I mean higher or lower I guess if you can give any color on that?

It depends on the time frame that you would look at it from. If you'd asked at the end of last quarter, it's higher than I would have expected. If you'd asked me last week it's lower. We're not going to do anything uneconomic just to put something in the backlog. We're negotiating on a couple of other things and we think we'll get them done. And if and when we do we'll get them out there. But I personally am pleased with the addition for this quarter. I think this is very strong, particularly when you look at the overall market out there.

So, then, if you can talk a little bit about -- so relative to the overall market, given the pretty sloppy commodity conditions that we're in, you'd indicated you thought if commodity prices were a lot higher, that obviously you thought the backlog would be a lot higher. And so just -- I'm trying to get a sense for how -- what the opportunity set more broadly is looking like from your perspective, if you can give any commentary on that front.

Let me jump in there, John. The truth of it is that we're damned pleased with having a $22 billion backlog in this kind of environment, number one. Number two, we have a heck of a lot more opportunities out there and it's a reflection of the fact that we have just a very good footprint spanning North America. And so, we're going to continue to look at this. Steve is absolutely right. We have some more opportunities that are pretty close to getting the horse in the corral. We hope to get it in and put the saddle on shortly and when we do we'll advise you of it. And we've got a lot of other potential here. But we're doing really well on the backlog. And I think to predict exactly where we are going to be in one quarter or two quarters is a fool's errand. But we're very pleased with where we are and what we have out in front of us.

That's actually really helpful. I'm just trying to get a sense for maybe more broadly the industry conditions. But that's very helpful. That's all I had for now, but thank you very much.

Thank you.

And the next question is from Darren Horowitz of Raymond James. Your line is open.

Hey Darren, how are you?

Hey, fine. Thanks Rich, I hope you and everyone are doing well. Just one question for me on UMTP. I realize you're involved in the open season until September, so, Steve, as you said, the saga continues. But with respect to all the recently proposed acquisitions and volatility across all of the NGL dynamics, including price expectations in the Northeast, how do you guys think about Northeast NGL supply/demand balance? How do you think it could change? And, more importantly, to what extent does that influence your thoughts either on scale or scope of the project or maybe even downstream market demand for batched NGL service on UMTP?

Okay, yeah, so a few things there. I mean one is, again, lower commodity prices do dampen the enthusiasm for making longer term commitments by the producers. But having said that, the long-term outlook, we think, for NGL production out of that region is very robust. And there are producers who are focused on that and realize that for their netbacks to be attractive they need to have an outlet and they probably need to have multiple outlets or have options. And we think having the option to access essentially the capital of the U.S. NGL market in Mont Belvieu, as well as the heart of petchem demand along the Gulf Coast here, as well as access to export docks, that's pretty attractive. And so, the people who are thinking about it longer term are going to be attracted to it. But there were a couple of modifications that we made to help improve our chances. You alluded to one of them, the batch system that makes us really not a competitor with the local fractionators. We can still move Y grade, that's one of the options. But we can move purity products. And just having the ability to batch different products adds options and therefore adds value to the outlook for producers associated with the project. The second thing is, quite frankly, we started working on the market side of this. And Ron McClain and his team have been talking to international off-takers who have a different timeframe and perspective that they bring to the table. And so, we're branching out, outside of just the traditional producing community and trying to find a way to cobble this together by focusing on the demand side, as well, with the market end of it as well. So, we continue to believe we have a good project. We've been here before. This is not our first open season. So, we're not putting in the backlog, we're not promising success here. But it's also not costing us a lot to maintain this option. We have the ability, as we've said before, to keep it in gas service and make it part of an additional southbound haul. So, we're going to keep working on it because we believe in it and we're going to keep trying to make it better and get people to sign up for long-term commitments.

Thanks, Steve.

I'll add, there's been a lot of preliminary interest in the open season, a lot of people have signed CAs. And so, [Technical Difficulty] interest is there and a lot of that is triggered by the [Technical Difficulty] and the multiple destination and origin point.

And the next question is from Brandon Blossman of Tudor, Pickering. Your line is open.

Hey Brandon, how are you?

I am good. How are you doing?

Good.

This will be a short one but I wanted to tag on the back of Darren's question on EMTT. Is this part of the natural progression, the open season, or was there a catalyst in quarter that kind of shifted the balance to get you guys to go ahead and do an open season? In particular I'm wondering if the spread on a percent realization of NGLs to crude helped spark interest on an end-market perspective.

No, not really any, call it, short-term spread difference. It was really, the progression here was Ron's team reconceived the project a bit in terms of the batch system and then spent a lot of time on the international, or on the demand side, let's call it, and developed that a bit and then we spent some more time with producers. And so, it was just the natural next step after having been out there socializing with everybody what the new configuration looked like and trying to figure out the right destinations and the right receipt points. It was just a natural next step. We often go out in open seasons with an anchor shipper and a pretty high probability, pretty high confidence level of success. I wouldn't call this open season one of those. We are out there in the marketing effort right now. We're going to see if we can get it done. It's not a seeded or anchored open season the way some of ours are.

Great, perfect color on that. Almost 1.5 [ph] of incremental term gas capacity signed up in the quarter. I'd call that impressive. As you look forward, is that going to be a high watermark for the next few quarters or is there something in the hopper, so to speak, that looks equally as good?

Tom, do you want to comment on that?

It's a big quarter, but I think we'll do more before the end of the year, I think. That would be probably another B out into the year, if possible.

Okay, that works for me. I think that's it for right now. Thank you, guys.

And the next question is from Jeremy Tonet with JPMorgan. Your line is open.

Hi Jeremy.

Hi, good afternoon. I want to go back to the topic of M&A for a minute, if you could. Just wondering if you could comment at all, in the market out there, if you see producers with midstream assets versus entry level consolidation. It looked more attractive on either side of that. And also how much are you guys looking outside of the U.S. at this point, in Canada or other jurisdictions? Do you see opportunities there, as well?

Dax?

Yeah, I would say that there is certainly some producers out there with assets. I would say that there probably is not necessarily the catalyst right now in certain of those producers that may have existed with certain people earlier this year. But there is certainly some producers that have assets. The earlier conversation, I think there still certain bid-offer spreads between what those producers' expectations for those assets are, whether it's valuation or control, those types of things, and what people are willing to pay. But you are seeing certain of those deals getting done. I think you may see a few more here and there, but those are still available. With respect to international assets, I think what we've said in the past; certainly the consolidation we did last year, as we said repeatedly, makes it easier, or drops down some barriers for us to deploy capital internationally. Now, I would say that we have -- so, it's certainly easier for us to do that it has been in the past. We certainly don't have a mandate to deploy capital internationally, but I think there are -- probably there are fewer barriers and we're probably more open to it than we have been in the past. But we're certainly cognizant [indiscernible] it would have to present some really good risk-adjusted returns for us to do it. And Western Canada is obviously a place where we have quite a bit of infrastructure and we have a very high [Technical Difficulty].

And just to add-on a little bit more there, in Mexico there's a lot of activity there. I don't -- I mean there's a lot of infrastructure going up to the border. But just wondering as far as your appetite of moving into Mexico and if that would be something of interest to you.

We'll look at all opportunities. It depends on the return-risk ratio. But, again, the point you're making is important. No matter who builds the lines in Mexico, we stand to benefit from them because we have a structure just across the border, whether in Texas or Arizona or in Southern California. So, I think we benefit, but we would not rule out doing something there, but it would have to be under the right terms and conditions.

Great, thanks. And then just one more -- commodity prices have been volatile and have recently shown weakness. And I'm just wondering if you could share any thoughts that you guys have internally on where prices might go and, more importantly, just refresh us on your hedging philosophy.

You want to add our view to your collection, is that it? First of all, we have maintained discipline around our hedging policy even when you don't necessarily like the prices you're seeing. Jesse and his team have continued to layer on the hedges even in this commodity price environment. I think there's a lot of near-term bearishness, certainly in across -- particularly across the liquids parts of the commodity portfolio. But I think longer term; the future is brighter for those as we see additional demand of pick up. But, look, it's so hard to call. Particularly oil has all of the geopolitical factors that you'd have to have a crystal ball to try to predict. But I think fundamentally you would believe there to be long-term upside in those commodity prices, but maybe not this year.

Got you. So, no changing to your hedging policy. You guys are still active in future years?

That's correct.

Okay great. Thank you very much.

And the next question is from Craig Shere with Tuohy Brothers. Your line is open.

Hi, Craig.

Hi, good afternoon. I was wondering what was driving or the thinking was in this commodity environment where there was maybe another $1 million, if I heard correctly, in additional EOR CapEx that hit the pipeline. And I was also curious if some more color could be given on some of the smaller fields that this quarter, those still behind budgets, seem to be picking up a little.

Okay. On the EOR front, I mean Jesse can fill in here. But what we have done is we've added some additional investment, which is really part of the program that we had anticipated all along on our tall cotton or residual oil zone recovery. That's the bulk of what we're adding to the backlog. We did an assessment of this, really, last quarter to look at what are the returns in the current commodity price environment and really looking at it at $50, $60, $40 and $70 range. And between $50 and $60, these projects are very attractive returns, and even better when you take into account even a modest assumption around cost reductions of say 15%. Jesse and his team are doing better than that right now. So, these projects are economic and we will pursue them so long as they are. And I'm sorry the second part of your question Craig was?

Production attachment [ph] and--

And what about it.

Goldsmith seemed to be picking up a little more. I know Katz and Goldsmith are behind but it seems like they may be perking up a little bit, and if there's any update that you could give.

I'm going to ask Jesse who heads up our CO2 operation. We're very pleased; Goldsmith was up 20% quarter-over-quarter. So, Jesse, do you want to comment on that?

Yeah, I think we've seen a lot of improvement with Goldsmith, primarily on our implementation with surveillance and facility optimization projects able to withdraw more fluid which was a hold back on production. I think we're currently averaging about 1,900 barrels a day, which is almost double what we had this time last year. So, we've seen a lot of improvement. Well operating costs are coming down. We're finding more efficient methods to move fluid. But, overall, we're pleased and we've come a long way in the quarter.

Great. And a bit of a follow-up, maybe, to Christine's question on industry M&A. I know that historically you normally don't pursue aggressive M&A, either in terms of paying a lot or hostile. But if large peers are putting themselves up, do you see absolute regulatory issues barring you from participating? Or is that something that you can at least sharpen the pencil on to determine if maybe some individual large assets are better placed somewhere else, but you can still participate in that process?

That would have to be determined on a case-by-case basis, looking at the exact assets involved and whether there is or isn't overlap with our footprint. But we would never rule anything out and certainly think we would study very carefully anything that came to fruition.

And last question, Rich, you said that there were attractive returns given the 20-year guarantee by Shell on that $630 million of additional investment. Is there roughly a broad range of EBITDA in that project you could offer at Elba?

I don't have an EBITDA number off the top of my head. I think--

But it's consistent with how we would price other projects with a long-term credit from an A rated credit.

Okay. Thank you.

And the next question is from Peter Levinson of Waveny Capital. Your line is open.

Hey Peter.

Hey guys, how are you?

Fine.

A question for Rich and Steve. It seems to us that in the last, call it, six to eight weeks your stock has been beaten up for four reasons. One, rates, fear of rate hikes in the Fed, et cetera. If we spot that the Fed is going to start to raise rates gradually it still doesn't seem to explain the move in your stock because you're trading at historical wides, and you're trading much wide to your comps than you have historically. Two, crude being down, Iran coming online, OPEC, et cetera. But you have given us the math; you've demonstrated you're not meaningfully exposed to the crude price. Three, the timely or untimely resurrection of what I thought was a wholly discredited bear attack by a tabloid claiming that your investment grade debt is not serviceable. And, four, your retirement. But you're showing us that you remain actively involved. You've been buying stock in the open market, you're leading this call. I'm struggling to understand. Until, call it, two weeks ago you and Williams traded exactly in line on a dividend yield basis. They got a bid at a 33% premium. Your stock trades down. What am I missing?

You tell me. It goes without saying, you guys listen to me, I'm the largest shareholder and I don't like it a bit. What's the old saying? I'm mad as hell and I won't take it anymore. But I can't use the latter part of that, obviously. No, I think in the long run markets are rational. In the short-term they can be irrational. If you look at it, we've looked at it every way from Sunday. Through the first quarter, we outperformed most of our peers. We fell off the second quarter. And if you look at it back through October when oil was last at $90, we've done pretty well compared with the peers. We're very disappointed with the performance over the last few weeks. Some of us have bought more stock. That's the only good thing, it's a buying opportunity. And we just don't see it. All the points you make are interesting. Certainly I don't think my retirement has anything to do with this. I'm still around; my name is on the door. Steve and Kim and the rest of this team can run it a hell of a lot better than I can, anyway. So, that should not be and is not in my opinion, a factor. But certainly rates are. Any time you have bear attacks I suppose that has some modest impact. But I am hopeful that after what we've said today and you can see this growth in the backlog and the fact that I'll never say, as Steve said, that we're unaffected, as he said. Sure, we have effect against us if our customers are suffering with low commodity prices. But in general, we're pretty oblivious to this. We're pretty able to profit and produce very nice cash flow regardless of where the commodity prices are. And to me, that's what makes this a great story. When you're out there saying we're paying a 5% dividend and giving you 10% growth for the next six years that to me is just a wonderful story based on $130 billion of enterprise value. So, we're very disappointed in the price, so thank you for giving me the opportunity to comment on it.

Okay. Thanks very much, and congrats on a great quarter.

And the next question is from Becca Followill of U.S. Capital. Your line is open.

Hi Becca, how are you?

I'm good. Thanks. On the $600 million project that you're deferring into, can you talk about what that is?

Yeah, it's primarily -- it's not exclusively, but primarily it is additional CO2 source development. And it's really two things. One is that part of the source development that we're continuing with at Doe Canyon we found a much more economic way to get the same amount of production essentially involved. We didn't have to build a whole new set of facilities. We can use an existing set of facilities to accomplish what we want out there, so we were able to take scope out of the project. But the rest of it and the majority of it, really, is that we think we can scale back the addition of additional CO2 source and still meet the demand that we expect for the market for the near-term so, during the period of the backlog. So, we still see growth in that CO2 demand, just not as much as it was before. Jesse, anything else?

So, none of it is reduced drilling or infield development?

It's not reduced. We're drilling on both ends of this thing. So, the EOR, it's not a representation of reduced activity in the enhanced oil recovery fields. It's on the development of CO2 production that we send down the pipe and send to third-parties and our operations.

Okay. Thank you. And then just to clarify Elba liquefaction, I think just based on your analyst meeting the original CapEx there was $884 million for your 51%. And then you're seeing additional $630 million, yet there's a total of $2.1 billion. Can you help me reconcile that difference?

I think the $885 million just pertained to our share of the plant itself. And we have other ancillary facilities that we are building as part of this and we're getting paid for.

So, think of Elba as two pieces with a third related piece. One is the liquefaction facility self. That was the JV; that was the 51/49 JV. The other is the Elba terminal facilities itself, which were always 100% Kinder Morgan. And then the third related pieces, the transportation, the upstream gas pipeline transportation that brings the gas into the facility, some of which is being done for Shell but some is being done for third parties, as well, and that's 100% Kinder Morgan.

Okay, great. And then to clarify on the product pipeline, did you restate you're showing volumes there?

We adjust for the JV. We may, yes, Becca, we would have adjusted both periods. There were some cases where we were showing JVs at 100%. So, we've gone to our pro rata share on those JVs. And it's an apples-to-apples comparison meaning we adjusted the prior period and this period.

Okay, got you. And then do you have a new estimate of CapEx excluding acquisitions for 2015? The original was $4.4 billion. There's been new productions in CO2 plus additions there. Is that $4.4 billion still ballpark or are we looking at lower than that?

We're looking at lower. So, the original $4.4 billion included a little over $300 million in acquisitions. So, the $4.4 billion is now $7 billion again, including acquisitions of Hiland and stuff. So, on the original budget it was $4.0 billion, really, or $4.04 billion of expansion CapEx. And that number is now $3.6 billion of the $7 billion is associated with expansion CapEx. So, about a $430 million reduction. And that -- it's got a lot of moving parts in it, but the biggest piece is roughly the $450 million reduction that I talked about in CO2, primarily associated with the S&P development at St. John's and the Lobos 5.

Okay, perfect. And then last question on Northeast Direct, with capacity of 1.3 BCF a day, contracted 550, I know you said you're comfortable; it's picking up volumes, maybe, especially in the winter. But how do you phase this in? If you don't get any additional contracts do you go forward with the full 1.3 assuming it's only 42% contracted? Or do you -- how do you phase it in so that you can maybe not be so under contracted?

Yeah, good question. If we get the pipe laid, the compression additions can be separate decisions. And so, when I talk about us being able to phase in as the commitments come in, we're going to ask to authorize the whole thing, but we will be able to make decisions on individual compression capacity additions as the commitments come through.

Yes, to just repeat what Steve and Rich said earlier, we're really kicking off the project for 600,000 a day. But certainly with the compression expansions we can scale it up as we get additional firm commitments, up to the 1.3, and that won't affect the original timing of serving of original customers because they are just compression expansions.

Thank you. That helps a lot. And then, finally, on EMTP, with no storage, or underground storage, up in the area, is that a big chunk of the $4 billion price tag -- having to build above ground storage to run the system?

We do have some storage additions included in the project. Ron, do you want to cover that?

We have some storage on the north end plan and we're looking at storage options on the south end. I don't believe they're included. That gets back to where the shipper wants to go with products, whether it's chem for refining or international. I think a big part of the issue potential on the south end. We do have some plans. To coordinate you have to buffer your product in a batch line. So, some products come in, others are building inventory and eventually will clear in so that there's operational [Technical Difficulty].

Thank you. And then, I'm sorry, I had one more. On Palmetto, how do you guys proceed without having that permit from Georgia?

As I said, the permit is not required for us to proceed with the project. It would have been helpful to the project. And I don't want to go into a lot of detail here. We're really exploring the options for how we nevertheless proceed with the project, but don't want to go into a lot of detail here for competitive reasons.

Understand. Thank you, guys.

And the next question is from Ross Payne from Wells Fargo. Your line is open.

Mr. Payne, how are you doing?

I'm doing fine Rich. How are you doing?

Good.

A follow on question to that. I assume the Palmetto was going to bring additional volumes for Elba Island to export, so I was going to ask--.

No, it's not.

Okay.

Yes, different product. Palmetto is gasoline, diesel and jet fuel. And of course we're talking about LNG.

Okay, my bad on that. With the Georgia situation, I guess you've given about as much information as you can, but in terms of your confidence level on being able to move forward with that, how would you gauge that?

We're still confident enough to leave it in the backlog -- it was already in the backlog -- which is a reflection that we believe that it's a highly probable project.

Okay. And then if you guys could give us a little bit of an update on where you are in your hedges for the rest of the year and then maybe looking into 2016 in terms of percentage of expected production that you're hedged and perhaps the level.

Yeah, on 2015 -- the balance of 2015 we're hedged at 81% at $78. In 2016, we're hedged at 58% at $75; 2017 at 36% at $75; 2018 is 27% at $75; and 2019 is 12% at $66.

Okay. Thank you, Kim, very much. And then one of the rating agencies recently wrote you guys up and kind of inferred that there could be some M&A that's outside of your typical business. If you guys can talk about what that might look like and just expand on that a little bit if you can.

Not sure what you're referring to there, Ross. Do you have something more specific on it? Or David, do you have an answer on it?

Yes, I think he's referring to -- Ross, I think you're referring to the Moody's write-up where they talk about the potential need to reach outside of our typical traditional skills of investments. And I think he referenced the Jones Act tankers, which we are very happy with that acquisition and are supported by long-term contracts.

Right. I just didn't know if there was going to be anything beyond that box that we've typically seen with you guys. And obviously Jones Act pushed it out a little bit but you could almost call that a moving pipeline. Do you guys envision getting into any other assets outside of the typical energy assets?

Look, Ross, as we've said many times, we look at our self as a toll road, and that toll road is a pipeline which is certainly our field of greatest expertise and where the majority of our assets are. That's great. If it moves by rail, we're pretty big in rail terminals. If it moves by ship, we have Jones Act tankers. We look at all these things that we can do as long as it's in the energy field and as long as we're acting as a toll road and could lock up as much of the cash flow as humanly possible. And that's why these Jones Act tankers have been so good. We've been able to enter into long-term contracts with very creditworthy shippers. So, we'll continue to look for opportunities like that. We're not going to go out and buy a bakery -- although I'm glad Hostess cupcakes are doing so well. We're sticking to what we know.

Great. All right. That's what I wanted to hear. Thanks, guys.

And the next question is from Faisel Khan with Citigroup. Your line is open.

HI Faisel, how are you?

Good. Thank you for the time. I appreciate it. Just a couple questions. Going back to somebody else's question on the product pipelines, the throughput volumes there, I just want to make sure I'm understanding this correctly. It looks like gasoline volumes sequentially dropped off pretty significantly, although they were up year-over-year. I just want to make sure I understand how those numbers move around. Obviously profits were up sequentially and up over last year. But I just want to make sure I understand how the seasonality works on the product pipelines.

I guess I'm a little confused on that. Our total refined products were 159 million barrels -- really 160 million barrels this time versus 304 year-to-date, which would mean it's actually up second quarter over first quarter, just eyeballing it.

Okay, sorry, I must be looking at different data then. I'm looking at 110 million barrels in the first quarter down to 98 million barrels, so I must be pulling different data then. That's fine.

We're up 4% overall on the refined product. A lot of that is on the West Coast and Pacific. We think lower commodity prices drives more demand. And there's also some recovery of economy. So, we're really enjoying that on both coasts.

Okay. So, the volumes are definitely up sequentially on the product pipelines.

Yeah. And I'm just looking at the same numbers from the release here. Our three months is more than half of the year-to-date so we're up --.

Okay, got you. I'm just reading the data wrong. Sorry about that.

But you would expect gasoline demand grows as you go into the summer months.

Right, that's what I was trying to look at.

If you look around here, and as Ron McClain was pointing out, that these lower prices, if they have any advantage, we are starting to see this as the third or fourth quarter in a row where we have seen improvement quarter-over-quarter, year-over-year. So, that's encouraging. But it looks like maybe lower prices are having some impact on how much people are driving.

And if you're looking at last quarter's press release, you might look at just this one and do the comparative data. Plantation may have been adjusted, too, our share of Plantation.

Okay. That's what we did -- that's what we have.

For both periods in this press release. But if you're looking at a prior one it might have that issue.

Okay. So, we must be getting it wrong. Okay, thank you for clearing that up.

[Technical Difficulty] 282% quarter-over-quarter. A lot of that is because of acquisition and tremendous growth [Technical Difficulty].

Okay, understood. And just a couple questions on potential enhancements or expansions of your current asset base. Is there a way for you to make a significant investment in the LPG export end market given the terminals you guys control around the country? How are you looking at that opportunity vis-à-vis the demand from customers?

Yea, we're looking at -- we have a great position on the Houston ship channel, a number of facilities, as you know, up and down the channel. And we have been looking at opportunities for export facilities. We don't have anything done yet. Go ahead John.

There are a number of opportunities present themselves. We're looking at LPG, both in Houston and the Northeast. But it's competing with clean product projects that we're looking at the same facilities as well as potential crude projects. So, the market is very ripe in Houston right now, it's just a matter of which products makes the most sense on a going forward basis.

Okay, understood. And if you think about those different options what's the more profitable barrel to ship? Is it gasoline and diesel or is it LPG?

Our experience on the Houston ship channel is 43 million barrels of gasoline and diesel. And we have had a tremendous amount of success on that and we have a number of projects to continue to grow and expand that. We've gone from four docks to 12 docks. Gasoline and diesel are both seeing resurgence on the export side. So, we'll see more and more opportunities there. The LPG projects are very profitable so they could compete with potential clean and other expansions. But we see more and more opportunities on the clean side, more so than the other two.

Okay. And just going back to a question someone asked about what kind of assets, would you own any other assets outside of the normal footprint you've been in? Would you ever buy a railroad company?

I think, as Rich said, what we're looking for is secure cash flows and particularly secure and growing cash flows. So, you couldn't say that that was off the table. There may be opportunities like that. But as you know, that's an extremely concentrated industry. We have done well, I think, with our investment in Watco, and that's about, I think, all there is to say on it.

Understood. Thank you for the time. I appreciate it.

Thank you. And at this time, there are no further questions in queue. I'll turn it back over to Mr. Rich Kinder.

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

And that does conclude today's conference. All parties may now disconnect. Thank you.