Kinetik (KNTK) - 2024 Q2 - Quarterly Results

Kinetik Q2 2024 Financial and Operating Results Executive Summary Kinetik reported strong Q2 2024 results with significant YoY growth, completing strategic M&A and revising full-year guidance upwards Q2 2024 Financial Highlights (YoY) | Metric | Q2 2024 | YoY Increase | | :--- | :--- | :--- | | Net Income | $108.9 million | 52% | | Adjusted EBITDA | $234.4 million | 13% | - Completed the acquisition of Durango Permian, LLC and divested its 16% non-operated equity interest in the Gulf Coast Express (GCX) pipeline[1] - Revised 2024 full-year guidance, increasing Adjusted EBITDA to a range of $940 million to $980 million and Capital Expenditures to $260 million to $300 million[1] Financial Performance Kinetik reported Q2 2024 net income of $108.9 million and Adjusted EBITDA of $234.4 million, maintaining strong financial ratios Q2 & H1 2024 Key Financial Metrics (in millions) | Metric | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | | Net Income | $108.9 | $144.4 | | Adjusted EBITDA | $234.4 | $468.0 | | Distributable Cash Flow | $162.9 | $317.4 | | Free Cash Flow | $105.4 | $213.0 | Selected Financial Ratios & Dividends (as of June 30, 2024) | Metric | Value | | :--- | :--- | | Quarterly Dividend per Share | $0.75 | | Dividend Coverage Ratio | 1.4x | | Leverage Ratio (per Credit Agreement) | 3.4x | | Net Debt to Adjusted EBITDA Ratio | 3.8x | - Total operating revenues for Q2 2024 increased to $359.5 million from $296.2 million in Q2 2023, primarily driven by a rise in product revenue[19] - Net income for Q2 2024 was significantly boosted by a $59.9 million gain on the sale of an equity method investment, related to the GCX divestiture[19] Operational Performance and Strategic Developments Kinetik processed 1.58 Bcf/d natural gas in Q2, a 7% YoY increase, integrating Durango assets and advancing Kings Landing projects - Processed natural gas volumes were 1.58 Bcf/d, a 7% increase year-over-year, even with wellhead volume curtailments of approximately 140 Mmcf/d due to Waha Hub pricing[2][4] - The company is integrating the acquired Durango assets, with a 100-day plan that includes preventative maintenance, facility upgrades, and capacity expansions. Over 70 employees have joined Kinetik[3] - Construction of the 200 Mmcf/d Kings Landing I plant is on schedule for an April 2025 in-service. Pre-FID work has been sanctioned for a second train, Kings Landing II, due to strong producer demand[4][9] - Expanded its relationship with a major customer in Lea County, New Mexico, through an amendment that increases minimum volume commitments (MVC) and margins starting in November 2024[1][9] Revised 2024 Guidance and Outlook Kinetik raised its full-year 2024 Adjusted EBITDA guidance to $940M - $980M and Capital Expenditures to $260M - $300M Revised 2024 Full-Year Guidance (in millions) | Metric | Previous Guidance (in millions) | Revised Guidance (in millions) | | :--- | :--- | :--- | | Adjusted EBITDA | $905M - $960M | $940M - $980M | | Capital Expenditures | $125M - $165M | $260M - $300M | - The revised guidance implies over 14% year-over-year growth in Adjusted EBITDA[5] - Key assumptions for the new guidance include approximately six months of contribution from the Durango business, divestiture of GCX interest in early June, and updated commodity price forecasts[5] - The increase in capital expenditures is driven by the construction of Kings Landing I & II, new agreements in New Mexico, and costs associated with the Durango business[5] Capital Allocation and Financial Position Kinetik achieved its core leverage target of 3.5x, enhancing capital allocation flexibility, with Net Debt at $3.42 billion - Kinetik has achieved its leverage target of 3.5x, a core financial priority that now allows for broader capital allocation flexibility[7] Net Debt Position (in thousands) | Date | Net Debt (in thousands) | | :--- | :--- | | June 30, 2024 | $3,423,251 | | March 31, 2024 | $3,537,244 | Governance and Sustainability Kinetik received the 2023 Safety Award from GPA Midstream Association and will publish its 2023 Sustainability Report in August 2024 - Received the 2023 Safety Award from the GPA Midstream Association for outstanding safety performance[10] - The company will publish its 2023 Sustainability Report in August 2024[10] Investor Information Kinetik will host its Q2 2024 conference call on August 8, 2024, and participate in multiple investor conferences - A conference call to discuss Q2 2024 results is scheduled for August 8, 2024, at 8:00 am Central Daylight Time[13] - The company will participate in upcoming conferences hosted by Raymond James, Citi, Barclays, Wolfe, and Citadel Securities between August and October 2024[11][12] - An updated investor presentation can be found in the Investors section of the company's website[12] Appendix: Financial Statements and Non-GAAP Reconciliations This appendix provides unaudited Consolidated Statements of Operations and detailed reconciliations of non-GAAP financial measures - Presents the Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2024 and 2023[19] - Includes detailed tables reconciling GAAP Net Income to non-GAAP measures like Adjusted EBITDA, Distributable Cash Flow, and Free Cash Flow[20][21] - Provides a reconciliation of total debt to the non-GAAP measure of Net Debt[22]