Welcome to the
Quarterly Earnings Conference Call. All lines have been placed in listen only mode for the question and answer session. This call is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the call over to Mr.
Rich Bender, Executive Chairman of Kendall Morgan. 3rd, JD Day.
Thank you, Kim. And before we begin, as usual, I'd like to remind you that today's earnings release is by KMI and KML and this call includes forward looking and financial outlook statements within the meaning of the Private Securities Litigation Reform Act of 1995, the Securities Exchange Act of 1934 and applicable Canadian provincial and territorial securities laws 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 and financial outlook statements and use of non GAAP financial measurements set forth at the end of KMI's and KML's earnings releases and to review our latest filings with the SEC and Canadian Provincial and Territorial Securities Commissions for a list of important material assumptions, expectations and risk factors that may cause actual results to differ materially from those anticipated and described in such forward looking and financial outlook statements. Before turning the call over to Steve and the team, let me make a few quick remarks. As you can see from our excellent 2018 results and our 2019 budget overview already released, the assets at KMI are generating strong and growing cash flow.
This is obviously a very good thing, but the question is how to deploy that cash in most effective way to benefit our shareholders. On that question, we get lots of suggestions from analysts and investors. As we have said so frequently, we can use the cash for 4 different purposes, to pay it out as dividends, to buy back shares, to pay down debt and to reinvest in capital projects. Over the past 3 years, we have used our cash for all of those purposes in varying degrees. We paid off over $8,000,000,000 of debt and reduced our debt to EBITDA ratio to our targeted 4.5 level and have had our credit rating upgraded by both S and P and Moody's.
We've raised the dividend from $0.50 in 2017 to $0.80 in 2018 and reiterated our intention to increase it to $1 in 2019 to $1.25 in 2020. We bought back over $500,000,000 worth of shares and we have funded our growth capital without needing to access external sources. In my view, that's pretty positive story. You can scribble about how the money gets allocated. But I believe investors should appreciate the overall flexibility that this strong cash flow provides.
And we will continue to use our cash flow in a disciplined way that most benefits our shareholders. As we have said so many times, the management and Board of KMI are significant shareholders and our interests are very passive with the rest of the shareholder base. Steve? Yes. Thanks Rich.
As usual, we'll be updating you on both KMI and KML. I'm going to start with a high level overview and then turn over to our President, Kim Tang to give you an update on our segment performance. David Michaels, Gamma's CFO, will take you through the numbers. Then Jack Sanders will update you on CML, and we'll take your questions on both companies. The 4th quarter capped a transformative year for KMI as we grew our business, strengthened our balance sheet, increased our dividend and continued to find attractive new opportunities to expand our network.
We experienced outstanding performance in our natural gas segment, our largest segment, where we saw significant year over year growth. We brought expansion projects online and added new project opportunities to the backlog, highlighted by our Permian Express pipeline project, which we FID earlier in the year and which brings an additional 2 Bcf a day from the Permian Basin to our extensive and trust based pipeline network on the U. S. Gulf Coast. That project like our Gulf Coast Express project is secured by long term contracts.
We experienced a record increase in natural gas supply and demand across the country. 2019 is projected to be another solid year of growth for U. S. Natural gas. That growth drives the value of our existing network and creates opportunities for us to invest capital and attractive returns to expand that network.
We have solid contributions from other parts of our business as well and Stephen Hayden will take you through our results. We made tremendous progress during 2018 in strengthening our balance sheet. We self funded our expansion capital expenditures as we have since the latter part of 2015. We also sold our Trans Mountain pipeline and the Trans Mountain expansion project for CAD4.5 million and transaction allowed us to return substantial value to our KML and KMI shareholders, while enabling the strengthening of our balance sheet and the derisking of both entities. In large measure, as a result of that transaction, we were able to end the year with our debt to EBITDA multiple at 4.5 times handily beating our goal of 5.1 times, which is what was assumed in the 2018 plan.
So we had a very good 2018. And as we showed in our 2019 guidance release, we're expecting year over year growth in 2019 as well. Now we will cover we will be focused on our 2018 results in today's call. The timing of this call, as always, comes right before we do our Investor Day. We'll have that next week and we'll go into the details on 2019 at that time.
With that, I'll turn it over to Karen.
Thanks, Steve. Well, natural gas had another outstanding quarter and it was up 8%. Market fundamentals there remained very strong. For the full year, natural gas demand increased from increased approximately 81 Bcf a day to approximately 90 Bcf a day, and 9 Bcf a day or 11% increase. This is driving nice results in our large diameter pipe.
For the Q4, transport volumes increased approximately 4.5 Bcf a day on our transmission system, a 15% growth. Deliveries to LNG facilities were over 1 Bcf in the quarter, that's approximately a 400,000,000 cubic feet a day increase versus the Q4 of 2017. Power demand on our system for the quarter was up 300,000,000 cubic feet a day and exports to Mexico on Kitchenergan Pipeline were up a little over 70,000,000 cubic feet per day. Overall, as Steve said, this higher utilization of our system, a lot of which came without the need to spend capital, resulted in nice bottom line growth in the quarter and longer term will drive expansion opportunities. On the supply side, we're also seeing nice volume growth.
On our gas and crude gathering system, volumes were up 21% and 13 percent, respectively, driven by higher production in the Haynesville, the Bakken and the Eagle Ford. In the Haynesville, our volumes more than doubled in the quarter and now are over just slightly over 1 Bcf today. A few updates on the large project. On PHP, we have identified an opportunity to increase the capacity by about 100,000,000 cubic feet a day and are currently working to sell that capacity. On GCX, we secured 100% of the right of way, construction is underway and we remain on target for an October 2019 in service.
On our Elva liquefaction project, we currently anticipate that we will be in service at the end of the Q1. Of course, this has continued to be a delay, but fortunately, we do not expect the delay to have a material impact on our costs, given the way our construction and commercial contracts are restructured. In our product segment, we benefited from increased contribution from Cogent, Utopia and offset somewhat by lower contribution from KMCC due to lower contract rates on that price. Refined volumes were up 1%, which is consistent with the EIA. Crude and condensate volumes were up 2% and that's due to increased volumes on our pipelines in the Eagle Ford.
However, there in the Eagle Ford, as I said, on KMCC, the impact of those incremental volumes was more than offset by the lower pricing and higher volumes in the Bakken where volumes were up 38%. Product differentials. However, the lower volumes here have minimal financial impact given the nature of our contract. Our terminal business was down 5% in the quarter. The primary driver is a lease payment from Edmonton South to Trans Mountain.
Prior to the sale of Trans Mountain was eliminated as an intercompany transaction. Excluding the lease payments, the terminal segment would have been down less than 2%. Our liquids business, which accounts for approximately 80% of the segment, was essentially flat with expansions in Houston and Alberta offsetting weakness in the Northeast. Our pulp business was down due to certain asset divestitures and lower contributions from coal, primarily due to a customer contract expiration, and that's despite higher coal volumes. Our pulp tonnage was up 10% in the quarter with the largest driver being coal volume.
Coal volumes were up almost 1,000,000 times. The liquid utilization was essentially flat in the quarter. CO2 benefited from higher CO2 prices, but that benefit was offset by lower average crude oil price and lower NGL volumes. Net crude oil production was flat versus the Q4 of 2017 with increased volumes at Saccarat largely offset by reduced volumes at our smaller fields. Saccarat volumes were up 5% versus last year.
They were 8% above our plan as we continue to find ways to access the significant remaining oil in place in that field. Tall cotton volumes were up 26% versus last year, but below budget. And NGL volumes were down 7% in the quarter due to a plant outage but that has since been remedied. The realized crude oil price was down 6% in the quarter, and that's despite a higher WTI price. The WTI hedges we have in place as well as the increase in the mid-twenty differential offset the increase in
the WTI.
For 2019, as we told you previously, we substantially hedged the MidCoast differential. That's an update on the segment. So with that, I'll turn it over
to David Michael. Thanks, Kim. Today, we're declaring a dividend of $0.20 per share, which rounds out our $0.80 per share dividend declared for the full year 2018. That's consistent with the 2018 budget and the plan that we announced to shareholders in July 2017. It also represents a 50% increase over the $0.50 per share we declared for 2017.
We also generated distributable cash flow of 2.65x our declared dividend for the year. And KMI had a very good quarter to cap off a very strong year. We grew meaningfully from last year's Q4 and ended the full year nicely above plan and nicely above 2017. In addition, as Steve mentioned, we significantly strengthened our balance sheet during the full year and that strengthening helped us result in pre credit rating updates by both upgrades by both Moody's and S and P to mid BBB each as risk as risk measures. On earnings, our revenues were up $149,000,000 or 4% for the Q4 of 2017 and operating costs were down $101,000,000 or 18%.
However, there were some certain items both this quarter and in the Q4 of 20 17 that create a little comparability noise. As a reminder, we define certain items as items that are recorded under GAAP but are non cash or occur sporadically, which we believe are not representative of our business' ongoing cash generating capability. Excluding certain items, operating income would have been would be up $35,000,000 or 3% from the Q4 of 2020. Net income available to common stockholders for the quarter was $483,000,000 or $0.21 per share, which is an increase of $1,528,000,000 $0.68 per share versus the Q4 of 2017, a 146% increase. This very large change was driven by a reduction in our deferred tax asset taken as a certain item during the Q4 of 2017 as a result of the federal tax rate cut.
That's a good example of a certain item that can make it difficult to compare our businesses operating performance period over period. Looking at earnings adjusted for all certain items, this quarter we generated $565,000,000 of adjusted earnings versus 4 $69,000,000 in Q1 of last year. That's a $96,000,000 improvement or 20% better quarter over quarter. Adjusted earnings per share was 0 point higher than the Q4 of 2017. Moving on to distributable cash flow.
Our EPS per share is $0.56 for the quarter, up $0.03 or 6% for the Q4 of 2017. The Natural Gas segment was the largest driver of that growth. The natural gas segment was up $83,000,000 or 8% and that's been the benefit of a multiple tons of chemo machines. EPNG and NGL were both up driven primarily by Permian supply growth. Kinderhawk and South Texas assets were up driven by increased volumes in Haynesville and Cooper.
CIG was also up to the growing DJ Basin production. Those are partially offset by lower commodity prices impacting our Highland assets and lower contribution from GLNG terminals were down 15 units, CO2 was down $12,000,000 and covered the main drivers behind the changes in those segments. PMT was down Kindermark Canada was down $50,000,000 or 100%. That's due to the TransVounce sale which closed in August. G and A, our general administrative expenses were lower by $66,000,000 driven by a greater amount of overhead capitalized due to a greater amount of spending on growth projects, non recurring expenses we incurred during the Q4 of 2017 and lower G and A from the sale of TransDome.
Interest expense was $6,000,000 higher driven by higher short term interest rates, which more than offset benefit we received from having a lower debt balance, as well as interest income earned on the TransAlta debt proceeds. First stock dividend were down in the quarter due to the conversion of our mandatory convertible securities occurred in October. Tax taxes were lower by $1,000,000 driven by higher state tax refunds. Staining capital $10,000,000 higher versus 2017. Our natural gas product segment was partially offset by lower sustaining capital for the sale turns out.
That was consistent before we had budgeted, we had budgeted sustaining capital for 2018 to be higher than 2017 We are ending the year relatively close to plan except for the TransAlta bill. Total DCF of $1,273,000,000 is up $83,000,000 or 7 percent driven by greater contribution to natural gas, lower G and A expenses, and lower preferred stock dividend, partially offset by the sale of Trans Mountain and higher sustaining CapEx. EPS per share is up $0.56 per share, up $0.03 0 point 0 $3 or 6 percent. Big drivers in ETF but with the partial impact on incremental shares and the conversion of our preferred stock. For the full year 2018 versus 2017, DCF was up $248,000,000 or 6 percent and ETF per share was $2.12 per share or 0 point 12 dollars 6 percent above $0.20 a very good full year performance.
For the full year relative to budget, ETF of $4,730,000,000 was up $163,000,000 or 4% from our budget for the year. Our DCF of per share of $2.12 is up $0.07 from our budget of $2.05 or 3% higher. So better nice performance for the full year versus plan as well, especially considering the sale of Trans Mountain and had budgeted a little bit of reflection in the Q3 of the year. Turning to the balance sheet, just like last quarter, you're going to see 2 net debt to EBITDA figures, 4.4x includes all of the penthouse sales proceeds as we consolidated all of that cash from KML's balance sheet onto KML. Including the cash that was paid to KML Public Shareholders on January 3, which is estimated at the end of the year, dollars 890,000,000 our adjusted net debt to EBITDA was 4.5 which is the second number.
That 4.5 times is a little bit better than last quarter of 4.6 times and is much improved from year end 2017 of 5.1 as well as the 5.1 is budgeted for the full year 2018. Obviously, Trans Mountain's sale was the largest driver of that improvement. Proceeds have now been distributed to both KMI and to the public AML holders. We used a portion of our share to pay down a little more than $400,000,000 that we had on our revolver and we most of the remainder of the funds is a $1,300,000,000 bond maturity and it's coming up here in February. Two largest changes on the balance sheet to note here are from year end, our cash and PP and E and both of those are largely driven by the TransAlta Net debt ended the quarter at $34,200,000,000 which is a decrease of $2,500,000,000 from year end and increase of $400,000,000 from last quarter.
So I'll reconcile those in Q3. Quarter change, we had $1,270,000,000 in ETF. We expect $586,000,000 in gross tender contributions in our joint ventures. A dividend of $455,000,000 we repurchased $300,000 of shares of net working capital source of $184,000,000 which largely driven by tax refunds due to approximately $400,000,000 for the quarter. For the full year, the $2,500,000,000 lower debt, netted by $4,700,000,000 of our DCF.
Growth CapEx and JV contribution of $2,570,000,000 $1,600,000,000 of dividends, $273,000,000 of share repurchases. The divestiture proceeds posted the total cash balance, $3,400,000,000 plus the KML public shareholders portion of those proceeds $890,000,000 and then we have working capital of $300,000,000 which was in terms of our late refund payment for the year. That rose to $2,500,000,000 of debt. And with that, I'll turn it back to Steve. Okay.
Now we're going to turn to Cam now and Jack Sanders will give you the update. Thanks, Steve. Before I get into the results, I do want to update you on few general items. First, as the release mentioned, we made the promise return of capital distribution associated with TransAlta sale on January 3. More specifically, we distributed almost $1,200,000,000 to AML's restricted to shareholders for approximately 11.40 dollars a share.
We also completed a 3 for 1 reverse stock split that was approved at the shareholders' meeting last November. With respect to the sale of Trans Mountain, you will recall that the agreement calls for a customary final working capital adjustment. We are substantially through that process and reviewed the calculation with the government of Canada and believe that the final adjustment will result in us making the final cash payment back to the government of approximately $35,000,000 in the Q1. And as such, we have booked this amount. This adjustment should not be viewed as a lowering of the purchase price or an otherwise change to the economics of the deal, rather it simply reflects that in closing, we delivered less cash to the government than we anticipated.
Consequently, and as I will walk you through in a minute, this will not have an impact on the previously communicated net cash and net debt position of KML. Moving to the business front, this is the Q1 where Baseline was essentially in service for the entire quarter and it contributed nicely to the portfolio. As of the end of the year, we have spent approximately $348,000,000 of our share with just over $8,000,000 remaining the total project spend for our share of $367,000,000 The $357,000,000 compares to the original estimate of $398,000,000 And as I mentioned previously, it is a result of cost savings on the project. Finally, a topic that I know is on everybody's mind is KML's ongoing strategic review. While we don't have anything to announce as the review is ongoing, we are hopeful that we will have the review completed in a direction to announce by the next earnings call.
While this review is taking some time, the time we are taking is necessary given the range of options, the cross border complexity, the fact that a strategic combination or sale of the company are among the options and the evaluation of those options require third party price and term discovery and that process takes time. Now I'll move it towards the results. End of note, as I talk to the results, I'm generally only going to reference results of continuing operations that we believe those are much more useful and relevant. Today, the KML Board declared a dividend for the Q4 of 0.16 $25 per split adjusted restricted voting share and $0.65 annualized, which is consistent with previous guidance. Earnings per restricted voting share from continuing operations for the Q4 of 'eighteen are $0.30 and that is derived from approximately $40,000,000 of income from continuing operations, which is up approximately $22,000,000 the Q2 of 2017.
The biggest contributors to the increase were strong revenue associated with the base line and the terminal coming online and interest income associated with the proceeds from the Trans Mountain sale. I do want to offer one comment on the almost $28,000,000 loan loss of discontinued ops. That is due almost entirely to the $35,000,000 payment on Trans Mountain that I mentioned. Adjusted earnings from continuing operations excluding certain items, were approximately $43,000,000 compared to approximately $18,000,000 for the Q2 of 2017. Total DCF from continuing operations for the quarter is $62,900,000 which is up $28,700,000 from the comparable period in 2017.
That provides coverage of approximately $13,000,000 and reflects a DCF payout ratio of approximately 31%, which is obviously somewhat skewed from the interest income. Looking at components of the DCF variance, segment EBITDA before certain items is up $1,900,000 compared to Q4 2017 with the pipeline segment up approximately $6,100,000 and the terminals segment up approximately 3.8 percent. The pipeline segment was higher primarily due to the recognition of deficiency revenue on Cogent and the non recurrence of an in line inspection done in 2017 Q4 2017. The terminal segment was higher due primarily to baseline coming online as the asset was not in service in 2017 and higher contract renewal rates at the North 40, partially offset by the expiration of a contract on the Imperial JV and the onetime nature of a capital true up via the same asset in 2017. G and A is essentially flat.
Interest is favorable by approximately $24,700,000 due to the interest on the TransCon proceeds and lower interest expense. The cash tax line item was essentially flat. Current dividends were up $2,600,000 given Q4 2018 had both proceeds outstanding for the full quarter across the press. The same capital was unfavorable approximately $3,600,000 compared to Q4 'seventeen due to timing on some work on book coaching and within the terminal segment. Looking forward to 2019, as with last year, I'll walk you through the details of KML's budget at the Analyst Conference 'nineteen.
With that, I'll move on to the balance sheet comparing year end 2017 to Twelvethirty Oneeighteen and my comments will focus only on the line items related to the retained assets and noncash assets or liabilities held for sale. Cash increased approximately $4,227,000,000 to 4,338,000,000 dollars As I mentioned last quarter, there's a lot of moving pieces in the change associated with TransConference. It was CapEx spend on behalf of government, the government credit facility and other purchase price adjustments, but I'm not going to take you through all that on this call. But if you want more detail, feel free to give us a call. Generally, the increase is the proceeds received current and not plus DCF generated less expansion capital, less distributions paid net of the grubs and less payoff and less the payoff of debt we had when we received the sale proceeds.
More importantly, let me take you through the pro form a reconciliation of what that year end cash balance looks like taking into account the immediate use of the TransNom proceeds following year end. Starting with the $4,338,000,000 in cash, approximately 3,970,000,000 dollars paid out from the special distribution on January 3. That's the sum of the $1,195,000,000 distribution payable to restricted voting shareholders and the $2,782,000,000 distribution payable to KMI, also on the balance sheet. Next, approximately $308,000,000 of cash taxes from the gain on the sale will be paid in Q1. Finally, you deduct the $35,000,000 final adjustment taxes kicked back Canada that I mentioned.
Setting all those items leaves you with a net cash position, obviously, with no debt of approximately $18,000,000 This is consistent with the comments we previously made about KMI having little or no net debt after taking into account all the pieces associated, moving pieces associated with transit on sale and associated distributions. Other current assets increased approximately 2,000,000 dollars due to an increase in AR associated with baseline coming online, transition services agreement going to Trans Mountain and interest receivable from interest on the Trans Mountain proceeds. Net PP and E decreased by $7,000,000 as a result of depreciation and excess of net assets placed in service. Deferred charges and other assets have decreased to 5 $3,000,000 which results provide off to the unamortized debt issuance costs associated with the Trans Mountain facility that we canceled. Moving on to the right hand side of the balance sheet.
As I mentioned, distributions payable and distributions payable to related parties increased from $0,000,000 to $1,200,000,000 $2,800,000,000 respectively as we reflected the commercial distribution. Other current liabilities increased $237,000,000 primarily due to taxes payable on the Trans Mountain sale. Other long term liabilities increased by $283,000,000 primarily as a result of the deferred tax liability released as a result of the gain of Trans Mountain sale. And with that, I'll turn it back to Steve. Okay.
Thanks, Zach. We want to take a moment to honor our late General Counsel, Kurt Moffett, who passed away on December 28 while skiing with his family. In addition to being a fine lawyer, Curt was a fine human being for deep personal connections with the people he worked with. We lost trusted colleagues, but many at Gitterborgan also lost a friend and a mentor. Kurt loves his work and his work shown through and we'll miss him.
Okay. With that, Jim, if you'll come back on, we'll take questions. Like we did last time, as a courtesy to everyone who has questions, we ask that you ask one question that you hold yourself to one question and one follow-up. And if you have more questions, we'll get to them. You just get back in the queue and we'll take you up into course, okay?
Thank you.
And the next question comes from Jeremy Tonet with JPMorgan.
Good afternoon. Thanks. Just want to start off here on the PO2 segment and taking into account some of the volume seems high prices here. I was just wondering how much of the $7,000,000,000 of capital in the backlog relates to the Citigroup segment? And does the commodity price environment kind of impact the pace or how you think about that spend given this volatility?
Yes. So in the CO2 segment, we've got about $1,600,000 backlog and we'll go through this in more detail in the conference. And yes, in CO2 also in our gathering and processing business, we've looked at CapEx on an ongoing basis. So we baked into account commodity prices and obviously the breakeven economics with the return for the projects that we look at typically will have ins and outs in both of those segments. And obviously, if commodity prices are lower, they tend to be out.
So the main topic there is tall cotton and we will continue to evaluate tall cotton and whether we make substantial additional adjustments in there as the year goes on. That's helpful. And just wanted to touch on SG and A. And it's just being down kind of 40%, dollars 67,000,000 year over year. It seems like a big kind of sit down, and it seems like some of that's related to growth there.
Just wondering if you could provide a little bit more color on that and is this kind of a new run rate or is the run rate thinking lower or any more color you could provide would be helpful. That's right. A good bit of it does relate to capitalization. David, do you want to go through that? About half of it is capitalization and a greater capitalized we had greater capitalized burdenable capital spend in the year of about $300,000,000 relative to the prior year.
So you put a reasonable capitalization rate on that and we give you around $30,000,000 of greater capitalized G and A costs. So a lot of that was driven by GCX, which is a pretty major project and Elba liquefaction spend. So a couple of major projects that we're spending here as well as all of our ongoing projects as well. And then a big chunk of that also was onetime G and A costs that we had in 2017 and it relates to the results of an internal policy change, which allowed more pay time off to be carried over to the subsequent year. And then of course, we had lower G and A costs in 2018 as a result of kind of down here.
So one hundred and fifty is kind of more of a real run rate G and A going forward, the way to think about it? Well, just depending on the capital the level of capital spend, we'll collect our value intake going forward. And we'll show you
our G and A budget for 2019 at the conference next week.
Got you. And just my first question, just to confirm real quick, 1.6 PO2 is 5.7. That's the right way to think about that for the backlog? All and almost all of the remainder is in natural gas. That's very helpful.
Thank you.
And our next question comes from Colton Bean with Tudor Pickering Holt and Co.
Good afternoon. Good afternoon. So you mentioned the improved results there in the Permian network. Is that primarily a result of throughput? Or are you still seeing some further increases in negotiated rates?
I guess just as a follow on to that, when you bring GCX into service later this year, is there any potential for rate improvement on maybe the 2 house network there in South Texas? Yes. So I guess first part of the question, yes, it is improvement and ultimately the rates that come up for renewal. And I think on the second part, just as more guests come into the state of Texas, just pushing that across our network, both for domestic consumption and export demand. I think there are some opportunities to increase rates on any contract renewal option.
Got it. And then I guess just on the proposed joint venture with Enbridge and Oil Tanking for the coal terminal, any thoughts as to how that project integrates with the existing footprint and whether there might be some ancillary opportunities if you were to reach FID there? Yes. So additionally, there's not integration, the initial size that we would expect. And again, this is not in our backlog.
This is something that we're working on with our partners and we're in development on end. Before we would put it in our backlog, we would need to see substantial commitments from shippers. In the early part of the project, we would anticipate the first build, we wouldn't expect to necessarily see it, but we could add connectivity in the larger build from AMCC. AMCC. That's helpful.
Thank you.
And our next question comes from Jameel Ghazani with Kemal Capital Markets.
My first question is on BHP. With a little uptick in capacity, dollars 300,000,000 dollars I was under the impression that you already capped out in terms of MAOP. What were you able to do to get the incremental $100,000,000 of Q2? And can you do the 2 things with GTX? Well, when we ordered compression, we upsized the compression order.
So it was a long lead time item. And we thought there is market for it if we can squeeze some more out and so we ordered a larger compression equipment, large capacity compression equipment. And DCX will look for little pockets here and there, but I would say it's not largely out there. Got it. And my second question is sticking on the mic.
So, obviously, with what's happening with the CTE California, Ruby has come up with the CapEx having a $77,000,000 of contracts. How should we see the contract as the principal table see and close there? Are those contracts tied to assets that are based open much money? How are you thinking about the cost for Peruvian? Look, I think there's some there's always uncertainty in the bankruptcy procedure, but I think there's some cause for optimism.
Let me first around the Ruby contract in particular, let me first start out by pointing out that it is Rupee specifically and exclusively that would be impacted by the potential PTE bankruptcy. So it's those 2 contracts. One of those contracts serves the electric generators that PG and E uses to obviously generate power and service load. The other provides service to PG and E's gas distribution business. So we view both of those as core contracts that are core to PG and E's business.
So that comp those two contracts together represent about $93,000,000 a year of demand revenue. So it is a material matter to our interest in Ruby. And again, while the bankruptcy process is uncertain, there's important facts. One of his wife said that they serve PG and E's core business. These contracts are used by PG and E and we've been told to expect continued utilization of those contracts.
These contracts help PG and E in meeting and feeding its service obligations to core customers. The contracts were approved by the CPUC when they're entered into. The CPUC does require maintain upstream firm transport capacity. And so those reliability aspects, we think help improve the chances of affirmation. Again, the process is uncertain.
And I'd also say those reliability aspects were confirmed recently with the GTN outage and diminished capacity there, which could increase in takes on the Rubicon Drive. So even though the current basis is lower and below the long term contract rates, there are reliability benefits to be considered. And finally, it's our understanding at least that prior in teaching these prior proceeding, they did not get checked for transport contracts. So that's not proof of what they'll do this time, but we think there are reasons reasons for optimism on these contracts. Thanks for the clarification.
Thank you. Our next question comes from Harold Julius with Credit Suisse.
Hey, good afternoon, everyone. I just want to start off with 2019 CapEx guidance. It looks like cash flows just won the majority of that and dividend. But it looks like if you get back into a number of about $400,000,000 hole to make up somewhere else. Should the remaining CapEx should be something to be basically fund the 2x at this point or could you see some core asset sales there?
Yes. Those are not really linked. We would look at those individually. But they're good. Yes, these numbers would be an expectation of some small debt financing.
So we would be financing more than all of the equity requirements and a substantial portion of the debt requirements for those capital investments. And we'll again, we'll take you through that in next
week's conference. And there's plenty of availability on the revolver.
Got it. Okay. And then just wanted to touch base again on the Bakken, get your latest thoughts around expanding Double H now that some new projects have been announced. I think there's 300,000 barrel a day open season on 20 spreads. We're pretty pipeline, announced the 350,000 barrel open season too.
So call it $650,000 needs to get down to currency come out if both of these go through. Just curious what that means for AAH here? Yes. That's something that we're actively looking at. Volumes continue to grow and we continue to work on solutions for our customers to get them through to Cushing.
And there is some expansion capability on HH. Okay. Appreciate it, guys. Thank you.
Next question comes from Harry Maffei with Barclays.
Good afternoon, Harry. Hi, good afternoon. First, just a follow-up on Ruvi. How should we think about the indemnification agreement that's in place from KMI on 6% of Ruvi's debt? And then just to clarify, Steve, have you been told since the recent bankruptcy headlines that you should continue to expect utilization of those gas supply contracts?
First, the indemnification no longer exists. And second, we're in pretty continuous conversations with our customers. Okay. Thanks for that. And then, David, you mentioned the KMI plans to pay down the February maturities.
So I know the Analyst Day next week, but can you just give us a sense for how you plan to manage the timing and the magnitude of debt issuance for the balance of the year? Should we just assume late 2019, giving kind of the loan act $1,000,000,000 maturity that's in December? We'll provide more information on that during the Analyst Day, but no near term need because of the cash that we have on hand. Got it. Thank you.
Just curious on the projects added to the natural gas backlog in 4Q. Could you give us some highlights there, where that is either geographically or around the stream, whether it be midstream or transmission in general regions? Yes. So it's probably half midstream, which part of that is on our income based system, other in the G and T side. And then the other half, I would say, is supporting LNG project yet to come.
Great. And then just a quick follow-up. You talked about the following up on the previous question on the volume growth you saw there. And just talking about utilization today and whether or not there's further headroom for growth on the existing asset base or the potential for expansion would require capital? Yes.
So we are investing in our gathering assets in the Bakken because they are constrained. And so we have discussions to expand our takeaway capability there, gas and crude. To get more out of HH, we would have to expand it. We would have to put capital in it. Understood.
Thanks, guys so much.
And the next question comes from Dennis Collins from America Merrill Lynch.
I have A couple of questions. One, if I could go back first to the KML strategic review. Maybe this is reading a little bit too much into sort of what I'm hearing. But Dax, it seemed like you sort of emphasized that options you listed were just among the options that are available. And I wonder if you might talk about what you mean by that or what other options we should be thinking about?
Yes. Thanks, Dennis. I mean, I think the options that are on the table are all the ones that we've articulated before. I mean, KML has a good set of assets. If you continue as a going concern, it could be one of the strategic transactions that I talked about.
It could impact AMI. So I think all of the options that there's not anything to do that we have previously spoken about. And I think we're going to be very thorough in thinking about every single one of those and which one makes the most sense. Okay. That's what I said.
There's nothing new there that hasn't been that is not something. Perfect. And then I guess, just to dig a little bit deeper on the terminals decline, I understand the Edmonton terminal, but the other thing that's talked about in the release is the New York Harbor issues. I wonder if you might just expand upon that a little bit. And is that is it a one time thing?
Is it seasonal? Or is there some impact from shipment that is more permanent? It's the same issue that we brought up last time at Staten Island. We're roughly 60% utilized there. We've done a great job over the last two quarters of kind of getting our head back above water, but we're looking at strategic alternatives for the site at this point.
We are hoping that we'll have clarity on that in Q2 and we'll be able to indicate it on our next earnings call.
But the reason that Staten Island is uniquely impacted is because there was a scope back in active
Purchased $0.75 on every barrel that goes through there, which makes it Reserves is competitive with New Jersey terminals. It's our own team, 2 of them. Got it. Got it. Okay.
Thanks for that. Welcome, Jim.
And our next question comes from Gina Salisbury with Bernstein. Hi. Is the government shutdown having any impact on your interactions with FERC on those are part 1, do you think that's fair on the pipeline for making an approval check?
No. FERC is funded. And so the answer there is no. I mean, I think there's a separate question about how a deadlock commission will operate on certain things, but the answer is no. And more broadly, Japan, the government shutdown is not having really much of any impact on us right now.
In time, with U. S. Fish and Wildlife not funded, it could have some impact on permitting, but nothing that's constraining its critical path, nothing that's on a critical path currently. It's not having much of an impact on us at this point.
Okay. That's helpful. And then another question. It seems like there's some debate about whether Permian gas pipelines have good returns. You have a slide in your appendix at the last Investor Day which shows a multiple kind of in line weather and better than your average average from others that those projects as soon
as the mix of returns
and duration didn't change your car. Can you just clarify that the company and Jefferies you're working on are sort of in line with your backlog average and that you're comfortable with the duration of the
projects and just any other color? Yes. We're getting these projects with return track and at attractive returns with long term contracts. And so it's they're a trade double digit unlevered after tax return. And it's not a it's not unlevered after tax return, but they're good solid returns.
And I agree with the observation just generally. I mean, we've looked at other opportunities out of the Permian crude and otherwise that we haven't been able to find the return levels that we would require to participate in that. But we're satisfied with the returns and their in line returns on our gas transportation expansion project out of the market. And this dovetails with what we said at the beginning of the call, which is we are using a disciplined approach as to how we allocate our capital. So we're not chasing deals that don't make bottom line sense for tender market.
Thank you.
And our next question comes from Robert C. Lea with CIBC Capital Markets.
Thank you. I just wanted to ask what is the impact on operations from the production curtailments in Alberta? The contracts that we have are take or pay there and then you see base monthly warehousing charge, so we have not seen an impact. You're not I understand that take or play wouldn't see anything there, but operationally, are you seeing different from the question? Yes, actually, at our Alprooted crude terminal, we had record volumes in the 4th quarter.
We had an average in 70 $7,000 a day. We had $146,000 in the Q4 and in December, we were up to $168,000 percent hit an all time one day high of 265%. So volumes have been very strong. Now we have seen them fall off a little bit in January as you would have expected, but it has had no impact on the bottom line. Okay.
And then if I could give the net interest impact on the Trans Mountain sales proceeds that impacted the DCF for KML. I would have tried to extract the interest income specifically related to the proceeds versus other interest expense you might have? Yes. I think you can assume we had what we paid back for the quarter, we didn't have any debt drawn during the quarter
for KML. And how much interest income, probably for the DCF?
Yes. So I think it's the 24.7 percent, it's the full amount there. So I'm saying that full amount, we didn't have any amount borrowed here in SEAT. So the full amount is interest from that. And that's the pretax or post tax amount?
That's pretax amount. Okay. Thank you.
And our next question comes from Michael Lapides from Goldman Sachs.
Hey, guys. Easy question for you. Can you just quantify what the impact on volumes being moved towards Mexico was in your system either for the quarter or for the full year? Back on volumes moved to Mexico. Yes, or volumes to Mexico through your system.
I'm just trying to get a gauge of whether your system is seeing a material benefit yet and if not now, when?
So we moved 73,000,000 cubic feet a day incremental to Mexico on our system during the Q4 versus the 4th quarter of 'seventeen.
Got it. Okay. So still relatively small relative to the brand team,
team. That's incremental. We're
in excess of 3 Gs given a day on average. Right. Okay. Thanks, guys. Much appreciated.
Your next question comes from Chris Mills, Jefferies.
Hey, Chris. Afternoon. Just following on the question, the last question, I just wanted to ask about export trends you're seeing on the refined product side. There's been some of a rash of articles recently about growing gasoline prices in Mexico with efforts by the government shutdown and pipeline stuff. So curious if at all how that's impacting you and how the change in that We're deeply at record volume on the Houston Ship Channel from an export standpoint.
We were up almost 8.5% from a volume testing standpoint over our ship docks and 10.1% on total volume. So very, very strong movements on the gasoline and diesel over our docks. In Houston alone, gasoline was up 8% and distillates were up 6%. Those figures, are those 4Q numbers you put in for fiscal year? 4Q numbers.
Okay. And has that changed at all? I guess, from very early in this year, but it seems like a lot of this is escalated once the calendar turns. Just curious if the conditions there are altered anyway? No, the only thing we've seen a little more of is we're seeing more volume move via rail out of our former Supai rail facility, which has now been repurposed to handle gasoline and distillates, and that's starting to ramp up transgravation in Mexico.
That's all Mexico.
And our next question comes from Mirek Zak with Citigroup.
Hi, good evening, everyone. Hi. Just a couple of questions from me. In the CO2 segment, the mid cush differential that you have hedged mostly for 2019, are those levels fairly similar to kind of what we saw in the quarter?
Yes. It's roughly $8 per barrel.
Okay. And just one quick follow-up. During the acquisition of the Renex field, are you looking to potentially do additional acquisitions of this type going forward? Or might that depend on sort of how you see small cotton balance over time? Yes.
I mean, that was a bit unique given its relationship to our Sacrock field and our ability to use that field for multiple purposes, meaning it produces oil and NGLs, but also the CO2 that it uses could be perhaps better used elsewhere in our portfolio and perhaps offsetting capital investments that we might make in order to expand CO2 production. So I would call it somewhat unique, but it's an example of the kind of things that people account for, things that fit and that integrate well with our existing operations.
Okay. Our next question comes from Echo Follow-up with U. S. Capital Advisors. Good afternoon.
Hey. Two questions. One, given that you're in settlement discussions on AT and T and pre settlement on Tennessee, any change you'd like to give given for roughly $100,000,000 impact over time and no impact in 'eighteen or no impact in 'nineteen?
No change. Yes, we're early in those discussions. We're encouraged to be engaged on those two systems, but we don't have any update in our guidance or outlook there. I think the $100,000,000 is still good from our perspective. It reflects the tax only component of that.
And we'll just have to see where the discussions come out. But we prefer this environment. We've traditionally been able to work things out with our customers and we would rather be doing it here than in a FERC process. So we're happy to be engaged in both of those systems.
Understand. And then back to Ruby. Can you remind us of the structure there? I think someone has preferred. And so that carves off a big chunk of the EBITDA.
So if by chance PG and E were to aggregate or to recub the contract, would that disproportionately hit KMI?
It would disproportionately hit KMI. And you're correct, permanent interest is a preferred. And that's why, as I said, it is a material matter to our interest in Ruvi. But as I also said, we think that there's reason to be optimistic about these contracts. Right.
Thank you.
Your next question comes from Danilo Juwadi with BMO Capital Markets.
Thank you. Double quick follow-up questions from me. Firstly, on TML, are there any major tipping points that may cause a potential shortage beyond the next earnings call? There's always a potential for that, but I think we feel like we'll be able to give you an update at the next earnings call. Yes, I think that's right.
That's our estimated time. It takes time and but we feel like we'll have an answer on that. Okay. Then as a follow-up to Gina's question on the pipeline returns. The service multiple that you outlined before, that's over the course of the 10 year contract duration?
Yes. What that is showing, I think we stated the same way in all these right, so you can start to hear EBITDA multiple. The contracts, the underlying contracts are for 10 years. And when we make the decision on the project investment, we're careful to look at a variety of terminal value assumptions to make sure that we're satisfied with the returns that we're seeing on our capital in appropriate scenarios. That's it for me.
Thank you.
We'll go next to the question from Jeremy Fung with JPMorgan.
Just a quick little follow-up. I wanted to touch base in the health right here. I was wondering if you could expand a little bit more on the drivers to the delay in going actually, it was like during Q1, you said before, now into Q1, you guys feel comfortable with the timeline or what's happened there exactly? Yes. So the delay continues to be associated with contractor productivity.
We're obviously getting into the final days here and we have people on the ground watching the progress that we're making. We're in commissioning activity simultaneous with the completion of the projects. And so we think end of Q1 is a good and reasonable estimate for when we'll be complete. There's obviously a band of uncertainty around that date, but we think we're closing in on it here. Okay.
That's helpful. That's great. Thanks.
And at this time, I'll share no further questions.
Okay. Well, thank you all very much for spending time with us and we will see most of you next week at the Investor Day. Thank you.