Kinetik Holdings Inc. Q2 FY2025 earnings call

• Kings Landing commissioning began in June, with plans to be fully tested and start up the front-end amine plant in the next 6 weeks, expecting to ramp to full commercial in-service by late September. Filed a permit for an acid gas injection well at Kings Landing to support resource play development. • ECCC pipeline construction started, expected in-service in the first half of 2026, with the ability to increase throughput capacity to approximately 300 million cubic feet per day for sweet gas. • Focused on optimizing cost structure, pursuing behind-the-meter power generation in Reeves County and owned compression solution. • Organic and inorganic growth pursuits positioned the company for accelerating growth into 2026.

In the second quarter, the Midstream Logistics segment generated an adjusted EBITDA of $151 million, up 3% year-over-year due to increased processed gas volumes from Northern Delaware assets. The Pipeline Transportation segment had an adjusted EBITDA of $97 million, up 3% year-over-year,受益于EPIC所有权增加和PHP的出色表现，但受2024年二季度出售Gulf Coast Express股权影响而部分抵消。

• Revised 2025 adjusted EBITDA guidance range to $1.03 billion to $1.09 billion. • Revised processed gas volume growth assumption from 20% in February to mid-teens due to Kings Landing start-up timing shift and producer development activity delays. • Tightened capital expenditures range to $460 million to $530 million, with concentration in the third quarter. • Anticipate annualized adjusted EBITDA of approximately $1.2 billion in the fourth quarter of 2025.

• Macro-economic uncertainty and global geopolitical pressures. • Commodity price volatility, with a 10% decline in commodity prices assumed in revised guidance. • Substantial operating cost inflation in lease compression and electricity, with unit cost per Mcf expected to be up approximately $0.06 year-over-year in 2025.

Q: Just wanted to start off, if we could here. If we look at the exit rate for 2025 for 4Q there, just wondering if you could walk through the building blocks that get you there and the confidence level of exiting the year in that $1.2 billion run rate.\nA: Sure. And look, a very valid and very good question. Look, the -- when you break down $1.2 billion, think about it as $300 million for the quarter. So we had $243 million for the second quarter. And as Trevor went through, we have already endured a lot of the operating cost impacts as it relates to high electricity pricing, higher compression leasing. So really, the building blocks from here to get from a $243 million. You're going to have a little bit of APA non-curtailment and maybe in the fourth quarter. That's what you should anticipate. Obviously, we had it in the second quarter, as everyone knows. I think the biggest one is going to be KL and Durango, obviously. And then you're going to have some incremental volumes. We've had some volume shift from third quarter turn in line to fourth quarter, which has, I think, tempered a little bit of the overall growth rate on the volumetric side. So, our exit rate remains pretty strong. However, because it's now in the fourth quarter and not the third quarter, you don't get that flow-through as far as duration of that volume for this calendar year. So, I think that are the 4 buckets. Everything else sort of stands pretty much as it is. And I think our degree of confidence Look, Kings Landing, I think we have really taken a measured approach as it relates to making sure that the plant is running and that we have got the plumbing. It's as much about the plumbing and separating out the sour gas from the sweet gas, which to this point, had all just been going, whether it's to Dagger Draw or to Miyajima. And now we have to separate, free up space on the sour gas side, which is the Miyajima and Dagger Draw facilities. And for the less sour gas send it to Kings Landing, even though we have front-end amine, we still don't have an AGI. So, we can't handle really, really sour gas at that facility. So we have been very methodical. I would say it's probably taken us longer. We were probably a little overoptimistic on how quickly we could get it done as far as the replumbing of the gas. But I think our confidence level now, Jeremy, is really high. It's really high. We know where the gas is. We've spent so much time. So maybe it's a little frustrating to get out of the blocks a little slower than many of us would have liked, including ourselves. But I think the follow-through and as we hit our stride, as we come out through the back end of this year, I think we will be the better for it.\nQ: Just wanted to pivot to buybacks, a good amount in the second quarter. Is this a rate that we can expect to continue here? Just wondering if you could provide more color on what that cadence could look like?\nA: I think it's a function of -- and Trevor can jump into this. It's really a function of where our stock price is. We see the stock in the low 40s as being incredibly compelling. And so, he is driven with more of a lead foot this past quarter, starting obviously in May. And I think, look, we will take cues from the market. We understand, we look at our capital allocation framework. We work out and we see where fundamental value is and where we really like the stock. And so, we will basically be attuned to how that -- to what we see on the screen.\nQ: I want to start with NGL re-contracting, if we could. I think it's more of a 2026 tailwind, but curious if some of the NGL pipeline operators are eager to negotiate early and make sure some of those volumes stay on the system. In other words, could we see that recontracting tailwind maybe coming earlier than expected?\nA: Spiro, look, it's a really good question. Obviously, we all know that I think Enterprise said that they expect by here to start up in the fourth quarter. So that occurs. And obviously, between Enterprise, Targa and Transfer, obviously, ONEOK and DCP as well as MPLX now. We have a much bigger grouping of NGL integrated players than probably ever before. And with, I would say, tempered enthusiasm and expectation on growth in the basin. With a lot of capacity to fill, we continue to see some pretty interesting overall indications and rates coming from different NGL service providers. You're right, in our context, we have 2 contracts that roll off next year. One is already -- you've got Targa steps into the shoes on one of them and the other is basically free to decide. And then in '27, we'll start off with Kings Landing once we reach the 2-year in-service mark. And then we follow from there. We've got literally almost serial expirations going on through almost the end of the decade and other contractual adjustments. So, I really do think we're going to be able to capitalize on it. We've always said that. and we'll sort of see where that takes us. But I think it's a good time to be on our side where you've got product. And there's a lot of capacity in the marketplace and obviously, a lot of people eager to fill that capacity.