Core Insights - Kinetik Holdings Inc. reported a net income of $15.5 million for Q3 2025 and $109.2 million for the first nine months of 2025, with Adjusted EBITDA of $242.6 million and $735.6 million respectively [2][5] - The company achieved full commercial in-service at the Kings Landing Complex, enhancing processing capacity in New Mexico, which is expected to support growth in the Delaware Basin [4][12] - Kinetik revised its 2025 Adjusted EBITDA guidance to a range of $965 million to $1.005 billion, reflecting ongoing market conditions and operational adjustments [6][11] Financial Performance - For Q3 2025, Kinetik generated Distributable Cash Flow of $158.5 million and Free Cash Flow of $50.9 million [2][5] - The Midstream Logistics segment saw a 13% decrease in Adjusted EBITDA year-over-year, while the Pipeline Transportation segment experienced a nearly 1% decrease [8][9] - The company repurchased $176 million of Class A common stock year-to-date, with $100 million repurchased in Q3 2025 [9][10] Operational Highlights - The Kings Landing Complex added over 200 million cubic feet per day (Mmcf/d) of gas processing capacity, which is crucial for returning curtailed volumes and supporting new development plans [4][12] - Kinetik reached a final investment decision (FID) on the acid gas injection project at Kings Landing, expected to enhance the company's capabilities in handling sour gas [6][13] - The company secured a five-year LNG pricing agreement with INEOS Energy for 0.5 million tonnes per annum at Port Arthur LNG, starting in early 2027 [6][15] Market Context - The Permian Basin remains a low-cost source of hydrocarbons, but the Delaware Basin rig count has decreased nearly 20% since the start of 2025, indicating a slowdown in producer activity [4][6] - Kinetik's management remains confident in the long-term value proposition despite current commodity headwinds and production challenges in the region [4][6] - The company is addressing takeaway constraints at the Waha Hub by enhancing transport capacity to the U.S. Gulf Coast, expected to commence in 2028 [15][16]

Company Overview - Kinetik Holdings (NYSE: KNTK) is a significant player in the US oil and gas infrastructure sector, involved in gathering natural gas, liquids, crude oil, and water from production sites, as well as compressing, transporting, processing, and treating these resources [1] Analyst Experience - The analyst has over 10 years of experience researching companies across various sectors, including commodities like oil, natural gas, gold, and copper, as well as technology companies such as Google and Nokia [1] - The analyst has researched more than 1000 companies in-depth throughout their investing career [1] Investment Focus - The analyst has transitioned from writing a blog to a value investing-focused YouTube channel, where they have researched hundreds of different companies [1] - The analyst expresses a particular interest in covering metals and mining stocks, while also being comfortable with other industries such as consumer discretionary/staples, REITs, and utilities [1]

Company Overview - Kinetik Holdings (NYSE: KNTK) is a significant player in the US oil and gas infrastructure sector, involved in gathering natural gas, liquids, crude oil, and water from production sites, as well as compressing, transporting, processing, and treating these resources [1]. Analyst Experience - The analyst has over 10 years of experience researching companies across various sectors, including commodities like oil, natural gas, gold, and copper, as well as technology companies such as Google and Nokia, and numerous emerging market stocks [1]. Investment Focus - The analyst has transitioned from writing a blog to a value investing-focused YouTube channel, where they have researched hundreds of different companies, with a particular interest in metals and mining stocks, while also being comfortable with other industries like consumer discretionary/staples, REITs, and utilities [1].

Core Insights - Kinetik Holdings Inc. is identified as a promising infrastructure stock with significant upside potential [1] - Recent price target adjustments by Goldman Sachs and Scotiabank reflect concerns over operational challenges and market conditions [2][3] Group 1: Price Target Adjustments - Goldman Sachs lowered its price target for Kinetik Holdings from $47 to $46 while maintaining a Buy rating, citing increased operating expenditures and lower volume growth [1] - Scotiabank also reduced its price target from $53 to $51, maintaining an Outperform rating, indicating operational turbulence in 2025 [2] Group 2: Company Overview - Kinetik Holdings operates as a midstream company in the Texas Delaware Basin, with two main segments: Midstream Logistics and Pipeline Transportation [3]

Index Changes - S&P 500 will add Interactive Brokers Group (IBKR) and remove Walgreens Boots Alliance (WBA) effective August 28, 2025 [1] - S&P MidCap 400 will add Talen Energy (TLN) and remove Interactive Brokers Group (IBKR) effective August 28, 2025 [1] - S&P SmallCap 600 will add Kinetik Holdings (KNTK) and remove Pacific Premier Bancorp (PPBI) effective September 2, 2025 [1] Acquisition Details - Walgreens Boots Alliance is being acquired by Sycamore Partners, with the deal expected to close soon [4] - Pacific Premier Bancorp is being acquired by Columbia Banking System, with the deal also expected to close soon [4]

Group 1 - The article emphasizes the focus on high-quality stocks with attractive valuations, specifically targeting companies with high return on equity and free cash flow [1] - Kinetik Holdings (NYSE: KNTK) is highlighted as a small-cap natural gas midstream company operating in the Permian Basin, which has been recently acquired by the company [1] - The presence of significant stakeholders such as Blackstone and ISQ Global in Kinetik Holdings indicates strong institutional support for the company [1] Group 2 - Thomas Lott, a seasoned financial professional with over 30 years of experience, advocates for Graham and Dodd/Buffett style investing, focusing on high-quality equities [2] - Lott's educational background includes a degree from Vanderbilt University and an MBA from Northwestern's Kellogg School of Management, enhancing his credibility in investment analysis [2]

[Glossary of Terms](index=3&type=section&id=GLOSSARY%20OF%20TERMS) The report includes a glossary defining key abbreviations and terms commonly used in the oil and natural gas industry - The report includes a glossary defining key abbreviations and terms commonly used in the oil and natural gas industry, such as **A/R Facility**, **ASC**, **ASU**, **Bbl**, **Bcf**, **Btu**, **CODM**, **Delaware Basin**, **EBITDA**, **Field**, **FASB**, **GAAP**, **MBbl**, **Mcf**, **MMBtu**, **MMcf**, **MVC**, **NGL**, **Throughput**, and **SEC**[9](index=9&type=chunk) [Forward-Looking Statements and Risk](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS%20AND%20RISK) This section outlines forward-looking statements and various risks, including acquisitions, market prices, competition, and regulatory changes, that could materially affect actual results - This section highlights that the report contains forward-looking statements regarding future financial position, business strategy, budgets, projected revenues, costs, and management objectives. These statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations[11](index=11&type=chunk) - Key risk factors include the ability to integrate acquisitions (**Barilla Draw** and **Durango**), market prices of oil, natural gas, and NGLs, competition, production rates, financial condition, access to capital, capital expenditures, risks associated with acquisitions/divestitures, construction risks, personnel retention, litigation, counterparty risk, regulatory and environmental developments, trade policy changes, extreme weather events, and the ability to achieve sustainability goals[11](index=11&type=chunk) - The Company disclaims any obligation to update or revise forward-looking statements, except as required by law, emphasizing that all such statements speak only as of the report's date[12](index=12&type=chunk) [Part I — Financial Information](index=6&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=ITEM%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Kinetik Holdings Inc., including statements of operations, balance sheets, cash flows, and changes in equity and noncontrolling interests, along with detailed notes explaining significant accounting policies, business combinations, revenue recognition, debt, equity, and segment information [Condensed Consolidated Statements of Operations](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This statement details Kinetik's operating revenues, costs, and net income, showing a significant increase in revenues but a decrease in net income attributable to Class A Common Stock for H1 2025 [Metric (In thousands, except per share data)](index=6&type=section&id=Metric%20(In%20thousands%2C%20except%20per%20share%20data)) | Metric (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating revenues | $426,738 | $359,457 | $870,001 | $700,851 | | Total operating costs and expenses | $349,283 | $302,869 | $773,266 | $618,162 | | Operating income | $77,455 | $56,588 | $96,735 | $82,689 | | Income before income taxes | $81,743 | $118,162 | $103,572 | $157,356 | | Net income including noncontrolling interest| $74,416 | $108,948 | $93,678 | $144,355 | | Net income attributable to Class A Common Stock | $23,645 | $37,192 | $29,775 | $48,742 | | Basic EPS | $0.33 | $0.54 | $0.38 | $0.68 | | Diluted EPS | $0.33 | $0.54 | $0.38 | $0.67 | - Total operating revenues increased by **19%** for the three months ended June 30, 2025, and by **24%** for the six months ended June 30, 2025, compared to the respective prior periods[15](index=15&type=chunk) - Net income attributable to Class A Common Stock decreased by **36.4%** for the three months and **38.8%** for the six months ended June 30, 2025, compared to the same periods in 2024[15](index=15&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This statement provides a snapshot of Kinetik's financial position, showing increases in total assets and liabilities, alongside a significant improvement in total equity as of June 30, 2025 [Metric (In thousands)](index=7&type=section&id=Metric%20(In%20thousands)) | Metric (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total assets | $7,150,997 | $6,814,937 | | Total liabilities | $4,340,551 | $3,835,871 | | Total equity | $(1,565,658) | $(2,976,596) | - Total assets increased by approximately **$336 million** from December 31, 2024, to June 30, 2025, primarily due to increases in property, plant and equipment, and deferred tax assets[20](index=20&type=chunk) - Total liabilities increased by approximately **$504 million**, driven by increases in long-term debt and accrued expenses[20](index=20&type=chunk) - Total equity improved significantly, reducing the accumulated deficit from **$(2,976,596) thousand** to **$(1,565,658) thousand**[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This statement details Kinetik's cash flows from operating, investing, and financing activities, highlighting increased operating cash flow, significant cash used in investing, and a shift to cash provided by financing in H1 2025 [Metric (In thousands)](index=8&type=section&id=Metric%20(In%20thousands)) | Metric (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $305,907 | $279,222 | | Net cash (used in) provided by investing activities | $(391,604) | $43,302 | | Net cash provided by (used in) financing activities | $92,824 | $(314,485) | | Net change in cash | $7,127 | $8,039 | | Cash, end of period | $10,733 | $12,549 | - Net cash provided by operating activities increased by **$26.7 million**, or **9.6%**, for the six months ended June 30, 2025, compared to the same period in 2024[22](index=22&type=chunk) - Net cash used in investing activities significantly increased to **$(391.6) million** in 2025 from **$43.3 million** provided in 2024, primarily due to higher property, plant and equipment expenditures and net cash paid for acquisitions[22](index=22&type=chunk) - Net cash provided by financing activities shifted from a net use of **$(314.5) million** in 2024 to a net provision of **$92.8 million** in 2025, driven by net proceeds from long-term debt and revolving credit facilities, partially offset by increased dividends and share repurchases[22](index=22&type=chunk) [Condensed Consolidated Statements of Changes in Equity and Noncontrolling Interests](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20EQUITY%20AND%20NONCONTROLLING%20INTERESTS) This statement outlines changes in Kinetik's equity, including a decrease in redeemable noncontrolling interest, share repurchases, net income attribution, and dividend payments during H1 2025 - The balance of Redeemable Noncontrolling Interest — Common Unit Limited Partners decreased from **$5,955,662 thousand** at December 31, 2024, to **$4,376,104 thousand** at June 30, 2025[27](index=27&type=chunk) - The Company repurchased **1,653 thousand shares** of Class A Common Stock for **$72,554 thousand** during the six months ended June 30, 2025[27](index=27&type=chunk) - Net income attributable to Class A Common Stock for the six months ended June 30, 2025, was **$29,775 thousand**[27](index=27&type=chunk) - Dividends on Class A Common Stock totaled **$95,663 thousand** for the six months ended June 30

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $243 million for the second quarter, with distributable cash flow of $153 million and free cash flow of $8 million [15] - Adjusted EBITDA guidance for 2025 has been revised to a range of $1,030 million to $1,090 million, reflecting a 5% decrease from previous estimates [16][20] - The company expects to achieve an annualized adjusted EBITDA of approximately $1,200 million in the fourth quarter of 2025, representing a 24% year-over-year growth [14] Business Line Data and Key Metrics Changes - The Midstream Logistics segment generated adjusted EBITDA of $151 million, up 3% year-over-year, primarily due to increased processed gas volumes from Northern Delaware assets [15] - The Pipeline Transportation segment also saw adjusted EBITDA of $97 million, up 3% year-over-year, benefiting from increased ownership in EPIC and modest outperformance at PHP [15] Market Data and Key Metrics Changes - The company has revised its full-year processed gas volume growth assumption from 20% to mid-teens due to delays in the commissioning of Kings Landing and producer development activities [16] - The company anticipates exiting 2025 with processed gas volumes at approximately 2 billion cubic feet per day [17] Company Strategy and Development Direction - The company is focused on expanding its footprint and volumes in Northern Delaware, with significant progress on capital growth projects [6][11] - The construction of the ECCC pipeline is expected to enhance the movement of sweet rich gas from New Mexico to Texas, with in-service anticipated in 2026 [10] - The company is pursuing both organic and inorganic growth opportunities, with a preference for organic growth at this time due to current market valuations [100] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational performance despite macroeconomic uncertainties and geopolitical pressures [6] - The company is optimistic about the potential for significant earnings growth and free cash flow generation through the end of the decade [14] - Management noted that while commodity price volatility has created headwinds, they expect to see a meaningful ramp in processed gas volumes as Kings Landing comes online [17][19] Other Important Information - The company has repurchased $173 million of its Class A common stock since May, representing nearly 2.5% of outstanding shares [21] - The company is experiencing significant cost inflation, particularly in electricity and leased compression, but expects unit costs to decrease as volumes ramp up [19] Q&A Session Summary Question: Can you walk through the building blocks to reach the $1,200 million run rate for Q4 2025? - Management explained that the building blocks include expected contributions from Kings Landing and other projects, with confidence in achieving the target despite some delays [28][30] Question: What is the expected cadence for share buybacks moving forward? - Management indicated that buybacks will depend on stock price and market conditions, with a focus on capital allocation based on fundamental value [34] Question: Can you provide insights on NGL recontracting and its potential timing? - Management noted that recontracting could occur earlier than expected due to increased interest from NGL pipeline operators [38][40] Question: What is the current status of Kings Landing 2 and its timeline for FID? - Management stated that they are midway through the process, with key components like acid gas injection and electricity being critical for progress [44] Question: How does the company view the macroeconomic environment and its impact on operations? - Management highlighted that while there are shifts in timing for producer activity, the overall quality of rock remains strong, and they expect to catch up with development plans [56][60] Question: How has the hedging strategy evolved in light of commodity price volatility? - Management indicated that they are more active in hedging and expect the impact of pricing to be relatively flat moving into 2026 [82] Question: What are the expectations for capital expenditures in the coming years? - Management emphasized the need to prioritize capital allocation carefully, focusing on high-return projects while managing overall spending [88][90]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported adjusted EBITDA of $243 million, distributable cash flow of $153 million, and free cash flow of $8 million [14] - The adjusted EBITDA guidance for 2025 has been revised to a range of $1.03 billion to $1.09 billion, reflecting a 5% decrease from previous estimates [15][19] - The company expects to achieve an annualized adjusted EBITDA of approximately $1.2 billion in Q4 2025, representing a 24% year-over-year growth [13] Business Line Data and Key Metrics Changes - The Midstream Logistics segment generated adjusted EBITDA of $151 million, up 3% year-over-year, driven by increased processed gas volumes from Northern Delaware assets [14] - The Pipeline Transportation segment also saw adjusted EBITDA of $97 million, up 3% year-over-year, benefiting from increased ownership in EPIC and modest outperformance at PHP [14] Market Data and Key Metrics Changes - The company has revised its full-year processed gas volume growth assumption from 20% to mid-teens due to delays in the commissioning of Kings Landing and producer development activities [15] - The company anticipates exiting 2025 with processed gas volumes at approximately 2 billion cubic feet per day [15] Company Strategy and Development Direction - The company is focused on expanding its footprint and volumes in Northern Delaware, with significant progress in capital growth projects [5][9] - The construction of the ECCC pipeline is critical for moving sweet rich gas from New Mexico to Texas, with expected in-service by 2026 [8] - The company is pursuing both organic and inorganic growth opportunities, emphasizing the importance of capital allocation towards high-return projects [12][96] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational performance despite macroeconomic uncertainties and geopolitical pressures [5] - The company is optimistic about the long-term growth potential, particularly with the commissioning of Kings Landing and the anticipated increase in processing capacity [12][19] - Management noted that while commodity price volatility has created headwinds, they expect to see a meaningful acceleration in adjusted EBITDA growth through the remainder of the year [19] Other Important Information - The company has repurchased $173 million of its Class A common stock since May, reflecting a commitment to delivering shareholder value [20] - The company is experiencing significant cost inflation, particularly in electricity and leased compression, but expects unit costs to decrease as volumes ramp up [17][18] Q&A Session Summary Question: Can you walk through the building blocks to reach the $1.2 billion run rate in Q4 2025? - Management detailed that the building blocks include expected contributions from Kings Landing and incremental volumes, with a high confidence level in achieving the target despite some delays [25][30] Question: What is the expected cadence for share buybacks? - Management indicated that buybacks will depend on stock price levels, with a focus on capital allocation based on fundamental value [32] Question: Can you provide insights on NGL recontracting and its potential timing? - Management noted that there is interest from NGL pipeline operators to negotiate early, which could lead to a tailwind for recontracting [36] Question: What is the current status of Kings Landing 2 and its FID? - Management stated that they are midway through the process, with key components like acid gas injection and electricity being critical for progress [40][41] Question: How does the company view the macro environment and its impact on operations? - Management highlighted that while there are shifts in timing for producer activity, the overall quality of rock remains strong, and they expect to catch up with development plans [50][54] Question: How has the hedging strategy evolved in light of commodity price volatility? - Management explained that they are more active in hedging and expect the impact to be relatively flat year-over-year moving into 2026 [79][80] Question: What are the expectations for CapEx in the coming years? - Management emphasized the need for careful capital allocation, focusing on high-return projects while balancing growth opportunities [86][87]

Financial Performance - Adjusted EBITDA for Q2 2025 was $243 million[8] - Free Cash Flow for Q2 2025 was $8 million[8] - Capital Expenditures for Q2 2025 were $126 million[8] - Leverage Ratio stood at 3.6x[8] - Midstream Logistics Adjusted EBITDA for Q2 2025 was $151 million, a 3% year-over-year increase, benefiting from an 11% year-over-year processed gas volume growth[12] - Pipeline Transportation Adjusted EBITDA for Q2 2025 was $97 million, a 3% year-over-year increase, benefiting from EPIC Crude ownership and PHP/Kinetik NGL outperformance[15] Guidance and Outlook - FY 2025 Adjusted EBITDA Guidance updated to a range of $1.03 billion to $1.09 billion[9] - FY 2025 Capital Guidance narrowed to a range of $460 million to $530 million[9] - The company maintains ~$1.2 billion annualized 4Q25E Adjusted EBITDA[23] Strategic Initiatives - The company repurchased $173 million of Class A common stock year-to-date, with $73 million repurchased in Q2 2025[9] - Commissioning at Kings Landing is underway, with full commercial in-service expected in late September 2025[9] - Construction began on the ECCC Pipeline, with expected in-service in the first half of 2026[9]