Kinder Morgan Inc Class P

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1 Grade Earnings Last Earnings Release 10/19/2017 Last Qtr. Actual vs. Est. $0.15 / $0.15 Next Release 01/18/2018 $0.15 Year Ending 12/31/2016 $0.66 Quick Facts Dividend Yield 2.8% 52 Wk High $ Wk Low $16.76 Short Interest 3% of float $ /13/2017 Rated 'SELL' since Mar 6th, 2015, when it was downgraded from 'HOLD' Year Ending 12/31/2017 $0.72 Market Cap $39.9B Overview Company Scores Very Poor Fundamental Grades MarketGrader currently has a SELL rating on Kinder Morgan Inc Class P (KMI), based on a final overall grade of scored by the company's fundamental analysis. scores at the 37th percentile among all 5816 North American equities currently followed by MarketGrader. Our present rating dates to March 6, 2015, when it was downgraded from a HOLD. Relative to the Oil & Gas Pipelines sub-industry, which is comprised of 65 companies, Kinder Morgan Inc Class P's grade of ranks 47th. The industry grade leader is Noble Midstream Partners LP (NBLX) with an overall grade of The stock has performed poorly in the last six months in relative terms, down 5.42% compared with the Oil & Gas Pipelines sub-industry, down 2.2% and the S&P 500 Index, up 9.0%. Please go to pages two and three of this report for a complete breakdown of KMI's fundamental analysis. Price, Rating and Sentiment History - 2 Years 1

2 Growth D Dismal Growth Indicators denote Very Difficult Operating Conditions and an Uncertain Outlook Kinder MorganClass P's sales growth continued its ongoing long term Market Growth LT F decline last quarter. Total revenue for the period was $3.28 billion, 0.52% below the $3.29 billion booked by the company a year ago. Its 12-month Market Growth ST D trailing revenue, which also included last quarter's results, was $13.41 EPS Growth F billion, 17.03% lower than the 12 months ended three years ago. As sales continue to slide the company will need to cut costs in order to protect its Growth Potential F margins and its cash reserves. However, unless business conditions improve soon, more drastic restructuring measures may be required. It Earnings Momentum C also reported very strong year-over-year profit growth, but not so when measuring full year profits against results from three years ago, showing Earnings Surprise C very weak growth from a long term perspective despite the latest short term jump. Kinder MorganClass P reported a Third quarter profit of $ million, reversing a loss of $ million (excluding extraordinary items) recorded in the year-ago period; 12-month trailing net of $1.39 billion reported in the period ended September 30, 2017 was 13.17% higher than the $1.23 billion profit reported for the same period ended three years earlier. The company extended its ongoing margin expansion with a very impressive increase during its latest quarter in which its EBITDA, operating and net margins jumped an average % from the year earlier period. Investors seemed slightly disappointed with the company's Third quarter earnings report on October 19, The stock lost a modest 0.86% following the announcement, despite earnings that were in line with the consensus view of $0.15 per share. Despite meeting the latest consensus estimate its average earnings surprise record is very poor; it has missed analysts' estimates by an average of 0.93% over the last six reports. Revenue Qtrly. 09/30/2017 $3.3B Revenue Qtrly. Year Ago $3.3B Revenue 1 Yr. Chg. (0.52%) Revenue 12 Mo. Tr. Latest $13.4B Revenue 12 Mo. Tr. 3Y Ago $16.2B Revenue 12 Mo. Tr. 3Y Chg. (17.03%) Net Income Qtrly. 09/30/2017 $371M Net Income Qtrly. Year Ago ($189M) Net Income 1 Yr. Chg. 96.3% Net Income 12 Mo. Tr. Latest $1.4B Net Income 12 Mo. Tr. 3Y Ago Net Income 12 Mo. Tr. 3Y Chg % Value B- Shares Look Expensive Particularly Relative to the Company's Mediocre Financial Results Kinder MorganClass P's shares trade currently at times the Capital Structure F company's 12-months' earnings per share, more than three times our "optimum" P/E of This ratio is calculated by MarketGrader by P/E Analysis F looking at the last five years' quarterly earnings, in 12-month rolling Price/Book Ratio F periods, in order to determine their growth rate. On this account Kinder MorganClass P's earnings per share have fallen at an annualized rate of - Price/Cash Flow Ratio A 8.77% during this time. If the company manages to translate its recent margin gains into higher Profitability grades, its negative EPS growth rate Price/Sales Ratio B- is likely to improve, giving the stock a boost. The stock's forward P/E of 25.88, based on estimates for the next four quarters, is higher than the Market Value A- S&P 500's forward P/E of but lower than its trailing P/E. The lower multiple investors are paying for its future earnings compared to past earnings reflects how high expectations are for future earnings growth, which run ahead of expectations for the market as a whole. Considering the company's poor overall fundamentals this premium over the S&P appears risky and sets up the stock for a significant fall if future earnings disappoint. Kinder MorganClass P's are trading at 1.13 times their book value, which is based on the company's stockholders' equity. However, MarketGrader's price to book value analysis is based on a company's tangible book value, which excludes goodwill and other intangibles from its assets. In this case, Kinder MorganClass Ps' intangible assets of $49.12 billion exceed its $35.22 billion in stockholders' equity by $13.89 billion, which means its tangible book value is negative. This makes the shares' price to tangible book ratio meaningless. Thus, part of the risk of owning the company's shares lies in the possibility of a significant write-down of its intangible assets, which would automatically make its shares much more expensive than they currently appear to be. The company's low price to cash flow ratio of 8.09, based on the $2.21 it generated in cash flow per share over the last four quarters, would be an attractive valuation if its overall fundamentals weren't so poor. Therefore such a low ratio could mean investors aren't willing to pay much for the company's earnings prospects. Its price to sales ratio of 2.97 is slightly higher than the Oil & Gas Pipelines's average of 2.67, both based on trailing 12-month sales. Our final value indicator looks at the relationship between the company's current market capitalization and its operating profits after deducting taxes. According to this indicator Kinder MorganClass P's $39.86 billion valuation is reasonable at times its most recent quarterly net income plus depreciation. P/E Ratio 12 Mo. Tr. 09/30/ Optimum P/E Ratio 7.50 Forward P/E Ratio S&P 500 Forward P/E Ratio Price to (Tangible) Book Ratio Price-to-Cash Flow Ratio 8.09 Price/Sales Ratio

3 Profitability C Company's Weak Profitability Grades Underscore a Difficult Operating Environment Kinder MorganClass P's $1.39 billion in net profits, earned during the 12 Asset Utilization C months ended last quarter, accounted for 10.38% of total revenue booked in the period, a healthy net profit margin, while its operating profit margin Capital Utilization F exceeded its peer average. Despite these impressive numbers, the Operating Margins A- company's return on equity during the same period was very poor, helping to drag down its overall profitability grade. Such contrast may be Relative Margins B+ attributed to generally weak business conditions across its entire industry while strong net profits may have been in part a result of large nonrecurring gains. The Oil & Gas Pipelines industry had an average Return on Equity F operating margin of 26.38% in the period. The company's operating Quality of Revenues D margin of 27.59% exceeded that average by 21.78%. Kinder MorganClass P had a terrible return on equity of 3.51% in the last 12 months, a reflection of very difficult business conditions. Incredibly this was actually an improvement from the return on equity of -0.75% based on the company's earnings for the 12 months ended a year earlier. While not excessively leverages, the company's capital structure should be monitored closely until it can prove recent gains are not only sustainable but can be translated into a stronger return on equity in coming quarters. Its total debt is 1.09 times its total shareholder equity, a moderate ratio, with long term debt accounting for 49.92% of total capital. Kinder MorganClass P's core earnings in the last twelve months grew moderately from the twelve months ended a year earlier. The company's EBITDA for the most recent period was $6.35 billion, or 3.46% above the $6.14 billion earned from its core operations in the prior period. EBITDA is used by MarketGrader to measure the company's true earnings power since it includes interest expenses, income taxes, depreciation and amortization, all non-operating expenses, which are nevertheless accounted for in other parts of our analysis that look at EPS gains and net income. Cash Flow B+ Company's Management of its Cash Flow Appears Very Sound but Could Improve in a Few Areas Kinder MorganClass P's cash flow fell slightly during the last quarter to Cash Flow Growth F $1.18 billion from $1.23 billion a year earlier, a 3.99% decline. Most importantly, this decline was significantly better than the drop in cash flow EBIDTA Margin A on a 12-month trailing basis, in which it fell 10.41% compared to the Debt/Cash Flow Ratio A- twelve months ended a year earlier. Apparently the company is succeeding in containing the fallout from a deteriorating business Interest Cov. Capacity A+ environment. Even though its net debt to cash flow ratio is pretty high, it is 27.90% lower than it was a year ago, suggesting the company is Economic Value D deleveraging. According to its latest quarterly statements its net debt, calculated as total debt minus cash on hand, was $37.48 billion and Retention Rate A- EBITDA was $1.60 billion. This ratio--and its change over time--helps illustrate the company's ability to repay debt with the cash it generates from operations. And it appears that reducing leverage is what the company has been trying to use its reserves for as cash on hand fell from $1.53 billion a year ago to $ million last quarter, a 47.90% reduction. But more importantly, during the same period its total debt as a percentage of total capital fell from 54.51% to 52.07%. If this trend continues Kinder MorganClass P will be well positioned for future earnings growth. Our Economic Value indicator measures how much the company generates in true economic profit by accounting not only for its costs of doing business (operating costs) but also the cost of the capital it employs. Based on its 12-month trailing operating income, Kinder MorganClass P's return on $70.34 billion in invested capital was 5.26%. The total after tax cost of capital, which includes all forms of equity plus long term debt, was 5.13% in the last year. The weighted cost of equity, or 4.09%, was significantly larger than the weighted cost of debt, which was 1.04%. When these costs are deducted from the return described above it results in a very poor economic value added (EVA) of 0.13%. This means Kinder MorganClass P's investors are receiving a mediocre return on the capital they've tied up with the company. The company announced on September 30, 2017 that it was cutting its quarterly common dividend 75.49% to cents a share from cents. Kinder MorganClass P has been paying a dividend to its common shareholders for at least 6 years. Including the latest payout, the stock is currently yielding 2.80%. Kinder MorganClass P spent $1.28 billion making common stock dividend payments in the 12 months ended last quarter, or 25.89% of its cash flow. But most disconcerting of all is the fact that even though this payout represents an incredibly high 91.60% of total after-tax earnings, the ratio actually represents a reduction from the % of total earnings paid out in the 12 months ended just a quarter ago. Considering the company's poor fundamentals the company might face a liquidity shortfall as it continues to erode its balance sheet, unless it reduces its payout more aggressively. Cash Flow Qtrly. 09/30/2017 Cash Flow Qtrly Year Ago Cash Flow 1 Yr. Chg. (3.99%) Cash Flow 12 Mo. Tr. Latest $4.9B Cash Flow 12 Mo. Tr. 3Y Ago $5B Cash Flow 12 Mo. Tr. 3Y Chg. (1.22%) Free Cash Flow Last Qtr. $284M Economic Value Total Invested Capital $73.5B Return on Inv. Capital 5.26% Weighted Cost of Equity 4.09% Weighted Cost of Debt 1.04% Total Cost of Capital 5.13% Economic Value Added 0.13% 3

4 Profile Kinder Morgan, Inc. operates as a holding company. It owns and operates pipelines and terminals that transport natural gas, gasoline, crude oil, carbon dioxide and other products and stores petroleum products, chemicals and handle bulk materials like ethanol, coal, petroleum coke and steel. The company operates through six segments: Natural Gas Pipelines, Products Pipelines, CO2, Terminals, Kinder Morgan Canada and Other. The Natural Gas Pipelines segment is engaged in the sale, transport, processing, treating, storage and gathering of natural gas. The Products Pipelines segment is engaged in the transportation and terminating of refined petroleum products, including gasoline, diesel fuel, jet fuel and natural gas liquids. The CO2 segment is engaged in the production and sale of crude oil from fields in the Permian Basin of West Texas and the transportation and marketing of carbon dioxide used as a flooding medium for recovering crude oil from mature oil fields. The Terminals segment is engaged in the translating and storing of refined petroleum products and dry and liquid bulk products, including coal, petroleum coke, cement, alumina, salt and other bulk chemicals. The Kinder Morgan Canada segment transports crude oil and refined products from Alberta, Canada to marketing terminals and refineries in British Columbia, the state of Washington and the Rocky Mountains and Central regions of the U.S. Kinder Morgan was founded by Richard D. Kinder and William V. Morgan on August 23, 2006 and is headquartered in Houston, TX. Key Facts: 1001 Louisiana StreetSuite 1000 Houston,TX Phone: Biggest Company in Sub-Industry Enbridge Inc. (ENB.CA) Grade 38.0 Market Cap:$81.93 billion Smallest Company in Sub-Industry Gendis Inc. (GDS.CA) Grade 28.9 Market Cap:$57.82 million MarketGrader Dilution Analysis Impact of Change in Shares on EPS - Q Dilution Summary Income Statement Last Qtr (09/2017) 12 Mo. Trailing Revenue $3.3B $13.4B *EPS Latest $0.15 *EPS Year Ago ($0.10) EPS Change 1 Yr. 246% C. Shares - Latest(M) 2,231 C. Shares - Yr Ago(M) 2,230 C. Shares - 1Yr Chg. 0% EPS if Yr. Ago Shares $0.15 EPS Chg. if Yr. Ago 246% EPS Loss from Dilution $0.00 *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Op. Income $831M $3.7B Net Income $371M $1.4B *EPS $ *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Balance Sheet Total Assets Total Debt Latest $80.4B $38.3B Stockholders Eq. $35.2B All numbers in millions except EPS Ratios Price/Earnings (12 mo. trailing) Price/Tangible Book Price/Cash Flow 8.09 Price/Sales 2.97 Debt/Cash Flow Return on Equity 3.51% Gross Margin (12 mo. trailing) 33.49% Total Assets Intangible Assets $80.4B $49.1B '12 '13 '14 '15 '16 '17 Qtr Operating Margin (12 mo. trailing) 27.59% Net Profit Margin (12 mo. trailing) 10.38% Long Term Debt $35.1B Qtr Total Debt Book Value Enterprise Value $38.3B $35.2B $37.5B Qtr Qtr

5 Top Down Analysis Energy Stocks in Sector: 533 Buys: 67 (12.57%) Holds: 63 (11.82%) Sells: 403 (75.61%) No. of stocks at: 52-Wk. High: Wk. Low: 46 Above 50 & 200-day MA: 145 Below 50 & 200-day MA: 255 Oil & Gas Pipelines Stocks in Sub-Industry: 65 Buys: 14 (21.54%) Holds: 8 (12.31%) Sells: 43 (66.15%) No. of stocks at: 52-Wk. High: 0 52-Wk. Low: 1 Above 50 & 200-day MA: 15 Below 50 & 200-day MA: 23 # Ticker Grade Sentiment Name Price Next EPS 1 NBLX P Noble Midstream Partners LP $ /01/ EQM N EQT Midstream Partners LP $ /01/ RMP N Rice Midstream Partners LP $ /09/ TGS N Transportadora de Gas del Sur SA $ /08/ CRZO N Carrizo Oil & Gas, Inc. $ /27/ PSD.CA N Pulse Seismic Inc. $ /10/ MTDR P Matador Resources Company $ /08/ VLP N Valero Energy Partners LP $ /15/ SRCI N SRC Energy Inc $ /22/ CNNX N CONE Midstream Partners LP $ /03/ KMI N $ /18/2018 # Ticker Grade Sentiment Name Price Next EPS 1 NBLX P Noble Midstream Partners LP $ /01/ EQM N EQT Midstream Partners LP $ /01/ VLP N Valero Energy Partners LP $ /15/ CNNX N CONE Midstream Partners LP $ /03/ MMP N Magellan Midstream Partners, L.P. $ /01/ TEP N Tallgrass Energy Partners LP $ /09/ USDP N USD Partners LP $ /15/ SHLX N Shell Midstream Partners LP $ /06/ AM N Antero Midstream Partners LP $ /28/ PSXP N Phillips 66 Partners LP $ /01/ KMI N $ /18/ Price Trend. C 2. Price Momentum. D 3. Earnings Guidance. B 4. Short Interest. A- 5.4 Copyright 2010 MarketGrader.com Corp. All rights reserved. Any unauthorized use or disclosure is prohibited. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or any options, futures or other derivatives related to such securities ("related investments"). The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regards to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. MarketGrader does not make markets in any of the securities mentioned in this report. MarketGrader does not have any investment banking relationships. MarketGrader and its employees may have long/short positions or holdings in the securities or other related investments of companies mentioned herein. Officers or Directors of MarketGrader.com Corp. are not employees of covered companies. MarketGrader or any of its employees do not own shares equal to one percent or more of the company in this report. 5