Kinetik Holdings Inc. Q4 FY2025 earnings call

2025 was a challenging year for the energy industry in Connecticut but had strategic progress. Closed bolt-on acquisition of Barilla Draw gathering assets. Achieved full commercial in-service at King's Landing, which is performing well. Reached FID on King's Landing sour gas conversion project. ECCC pipeline completion on schedule. Announced FID on first behind-the-meter gas-fired power generation project at Diamond Cryer facility. Amended gas gathering and processing agreements with large legacy customers, enhancing long-term cash flow visibility. GMP agreement in Delaware South amended to improve customer's natural gas price realizations. Executed long-term agreements with CPV and INEOS. Priorities for 2026 include meeting or exceeding financial estimates, tightening operating cost discipline, delivering projects on time and on budget, playing offense regarding Waha exposure, and converting commercial opportunities pipeline into long-term agreements.

In the fourth quarter, adjusted EBITDA was $252 million. Midstream Logistics delivered $173 million of adjusted EBITDA, up 15% year-over-year. Pipeline transportation generated $84 million of adjusted EBITDA down year-over-year due to the Epic Crude divestiture. For the full year, adjusted EBITDA was $988 million, slightly above the midpoint of revised guidance. Capital expenditures were $497 million in line with revised guidance. We expect 2026 adjusted EBITDA of $950 million to $1.05 billion. Midstream logistics segment key assumptions include high single-digit growth in process gas volumes, approximately 100 million cubic feet per day of expected Waha price-related production shut-ins, gas process volumes exceeding 2 billion cubic feet per day in the second half of 2026, approximately 84% of fixed fee gross profit and flat to slightly down operating expenses relative to third quarter 2025 run rate. 2026 capital expenditures expected to be 450 million dollars to 510 million dollars with approximately 70 percent of capital spent in New Mexico.

Expect 2026 adjusted EBITDA of $950 million to $1.05 billion. Midpoint of $1 billion represents over 7% growth year-over-year when adjusting for sale of Epic crude. Midstream logistics segment assumptions include high single-digit growth in process gas volumes, 100 million cubic feet per day of expected Waha price-related production shut-ins, gas process volumes exceeding 2 billion cubic feet per day in second half of 2026, 84% of fixed fee gross profit and flat to slightly down operating expenses. 2026 capital expenditures expected 450 million to 510 million dollars with 70% of capital spent in New Mexico. Revised capital allocation framework includes growth oriented framework, target leverage between 3.5 and 4 times, increase dividend annually by 3 to 5% until coverage reaches 1.6 times, pursue share repurchases opportunistically.

Q: Notable difference in tone this call from last call, what's giving renewed confidence and why confident in EBITDA range?

A: Jamie said had bumps in 2025, restructured large legacy Durango midstream contracts, there's a lot of activity in Northern Delaware, and organic growth first is critical.

Q: Dividend guidance implies growth beyond 2026, how thinking about growth beyond this year, impact of Permian gas egress, NGL recontracting?

A: Jamie said 2026 is 7% growth when normalizing by excluding Epic, trajectory is incline, egress like 5.3 BCF a day by phase two of Hugh Brinson, Iger Express and Desert Southwest to come online, on NGLs, expecting more to come over course of 2026.

Q: Curtailment volume guidance, how much curtailed volumes have come back, expectation for 2026?

A: Trevor said 170 million cubic feet a day average curtailments in fourth quarter, amendments brought back 50 million cubic feet a day, assumed 100 million cubic feet a day average curtailments in 2026.

Q: King's Landing commercial negotiations, how much factors into AGI capacity ramping up?

A: Jamie said continuing to progress, restructurings of large legacy customers is positive, many commercial discussions, expect announcement on KL2, included amount in capital budget assuming FID.

Q: Commodity sensitivity, fixed fee versus commodity, confidence in hedging exposure?

A: Trevor said percentage of overall gross margin from commodity remains elevated due to marketing contributions from Gulf Coast transport hedge, expected to go away in 2027. Chris on creative commercial structuring, using Gulf Coast capacity as lever, optimistic about Waha relief.

Q: 40 megawatt behind the meter project, whether shopping power to third parties, decision points?

A: Gabe was told it's for self-consumption at Diamond, can convert to combined cycle facility, $25 million capital, attractive project.

Q: Growth capex number details, what's in it, normal course recurring items?

A: Trevor said page 10 of earnings slides shows field and maintenance, about 50% of $480 million capital backlog is regular way capital, trunk line and facility side have non-recurring items.

Q: Cadence of EBITDA by quarter, exit rate EBITDA in Q4?

A: Trevor said fourth quarter 2025 included about $5 million EBITDA from Epic Crude and OPEX benefit, normalized fourth quarter numbers around 230 to 240, third and fourth quarters around 260 to 270 to hit full year $1 billion.

Q: 4Q success in managing around WAHA, what's different, steps in 2026?

A: Rob was told secured additional Gulf Coast capacity, restructured three contracts, took more heavy hand on curtailment expectations.

Q: Inbound strategic interest, how derive value for shareholders?

A: Jamie said always willing to evaluate opportunities that maximize shareholder value, if someone can provide more value than can create themselves, will evaluate.

Q: KL ramp, where it stands, how transpiring?

A: Trevor said 65%-70% utilization, expect second half of 2026 to get to 200, Jamie said King's Landing has been unqualified success operationally.

Q: DeliverSouth footprint, what customers are seeing, growth drivers, durability?

A: Trevor and Chris said commercial team expanding business, deeper zones development, deconsolidation theme, resources there.

Q: NGL recontracting timeline, when clarity on economics and cost savings?

A: Was told hard to give exact date, accumulating information, will communicate when done.

Q: Power solutions, how helps besides attractive multiple?

A: Jamie said important for reliability, if Waha gas price negative, electricity cost effectively zero, OPEX components include salaries, compression, electricity.

Q: Upstream producers' technology impact on Permian recoveries, agreement with them?

A: Chris said tend to agree, Permian well performance improve over time, efficiencies like higher weld density and days drilled coming down benefit Kinetic.