Kinetik (KNTK) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Results and Commentary 1.1 Summary of Q2 2025 Performance Kinetik achieved $74.4 million net income and $242.9 million Adjusted EBITDA in Q2 2025, with natural gas throughput increasing 11% year-over-year Metric | Metric | Q2 2025 (million USD) | H1 2025 (million USD) | | :----------------------------- | :-------------------------- | :------------------------ | | Net Income (incl. non-controlling interests) | 74.4 | 93.7 | | Adjusted EBITDA | 242.9 | 493.0 | | Distributable Cash Flow | 153.3 | 310.3 | | Free Cash Flow | 7.9 | 128.3 | - Natural gas throughput reached 1.75 Bcf/d in Q2 2025, representing an 11% year-over-year increase[4] 1.2 CEO's Strategic Outlook and Guidance Update CEO Jamie Welch noted natural gas throughput growth despite commodity price declines and rising costs, anticipating significant H2 2025 performance improvement with Kings Landing's September operation and updated full-year guidance - Q2 2025 Adjusted EBITDA was $243 million, with natural gas throughput increasing 11% year-over-year[4] - The Kings Landing complex has begun commissioning and is expected to be fully in commercial operation by late September 2025, which will alleviate producer constraints and resume new development activity[4][5] 2025 Full-Year Guidance Update | Metric | Original Guidance | Updated Guidance | | :-------------------- | :-------------------- | :-------------------- | | Adjusted EBITDA | Not mentioned | 1.03 billion to 1.09 billion USD | | Capital Expenditures | Not mentioned | 460 million to 530 million USD | - ECCC pipeline construction has commenced, anticipated to be in service in H1 2026, providing critical rich gas takeaway capacity for the Delaware North system[5] Financial Highlights 2.1 Selected Key Metrics The company reported key financial metrics for Q2 and H1 2025, including net income, Adjusted EBITDA, distributable cash flow, free cash flow, leverage ratio, and net debt 2025 Q2 and H1 Key Financial Metrics | Metric | Q2 2025 (thousand USD) | H1 2025 (thousand USD) | | :-------------------------------- | :---------------------- | :-------------------- | | Net Income (incl. non-controlling interests) | 74,416 | 93,678 | | Adjusted EBITDA | 242,933 | 492,950 | | Distributable Cash Flow | 153,303 | 310,284 | | Dividend Coverage Ratio | 1.2x | 1.2x | | Capital Expenditures | 126,267 | 204,341 | | Free Cash Flow | 7,882 | 128,275 | | Leverage Ratio (as of June 30) | - | 3.6x | | Net Debt to Adjusted EBITDA Ratio (as of June 30) | - | 4.0x | | Net Debt (as of June 30) | 3,943,567 | - | 2.2 Key Financial Achievements Kinetik achieved robust net income and Adjusted EBITDA in Q2 2025, actively executed a share repurchase program, and optimized its capital structure through debt refinancing - Q2 net income was $74.4 million, and Adjusted EBITDA was $242.9 million[9] - To date, $172.6 million of Class A common stock has been repurchased under the existing program, with $72.6 million repurchased in Q2[9] - Refinanced the company's Term Loan A and Revolving Credit Facility, extending maturities to May 30, 2028, and May 30, 2030, respectively[9] - At quarter-end, the company's leverage ratio under its credit agreement was 3.6x, and the Net Debt to Adjusted EBITDA ratio was 4.0x[9] Operational and Construction Updates 3.1 Project Development and Commissioning Kinetik advanced key projects in Q2, including Kings Landing commissioning and ECCC pipeline construction, enhancing infrastructure and operational capabilities - Kings Landing has commenced commissioning and is expected to be fully in commercial operation by late September 2025[10] - ECCC pipeline construction has begun, with an anticipated in-service date in H1 2026[10] - An acid gas injection permit application for Kings Landing has been submitted, with approval expected by year-end 2025[10] Governance and Sustainability 4.1 Corporate Governance and ESG Initiatives The company implemented governance and sustainability initiatives, including NYSE Texas listing, publishing its 2024 Sustainability Report, and participating in an ultra-low carbon e-fuels project - Kinetik's common stock has been listed on NYSE Texas, while maintaining its primary listing on the New York Stock Exchange[10] - The 2024 Sustainability Report has been published, highlighting the company's sustainability initiatives, progress, and achievements[10] - Infinium has begun construction of Project Roadrunner, an ultra-low carbon e-fuels production facility, with Kinetik becoming a long-term CO2 feedstock supplier upon completion in 2027[10] Investor Relations and Company Information 5.1 Upcoming Investor Events Kinetik plans to attend several upcoming industry conferences and events, with updated investor presentations available online - Kinetik plans to attend the Citi Natural Resources Conference (August 12-13), Barclays CEO Energy-Power Conference (September 3), PEP Energy Conference (September 29), and Wolfe Utilities, Midstream & Clean Energy Conference (September 30)[11][15] - Updated investor presentations will be available in the investor section of the company's website[11] 5.2 Company Overview Kinetik Holdings Inc. is a fully integrated, pure-play midstream C-Corp operating in the Delaware Basin, providing comprehensive services for natural gas, NGLs, crude oil, and water - Kinetik is a fully integrated, pure-play midstream C-Corp operating from the Permian Basin to the Gulf Coast, headquartered in Houston and Midland, Texas[13] - The company provides comprehensive gathering, transportation, compression, processing, and treating services for companies producing natural gas, natural gas liquids, crude oil, and water[13] 5.3 Forward-Looking Statements Disclaimer This press release contains forward-looking statements based on management's assumptions, where actual results may differ materially due to risks and uncertainties, and the company disclaims any obligation to update them unless legally required - Forward-looking statements include predictions, forecasts, or other descriptions of future events or circumstances, covering the company's future business strategies, plans, operational objectives, growth opportunities, shareholder returns, dividend amounts, and financial condition[14] - Actual results and developments may differ materially from expectations due to various risks and uncertainties, potentially causing significant discrepancies in actual results, performance, and financial condition compared to expectations[14] - The company undertakes no obligation to publicly update any forward-looking statements unless required by law[16] Consolidated Statements of Operations 6.1 Unaudited Financial Statements Kinetik released unaudited consolidated statements of operations for the three and six months ended June 30, 2025, detailing key financial data including revenue, costs, expenses, and net income Consolidated Statements of Operations Summary (Unaudited) | Metric | Q2 2025 (thousand USD) | Q2 2024 (thousand USD) | H1 2025 (thousand USD) | H1 2024 (thousand USD) | | :----------------------------------- | :---------------------- | :---------------------- | :-------------------- | :-------------------- | | 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 (incl. non-controlling interests) | 74,416 | 108,948 | 93,678 | 144,355 | | Net Income Attributable to Class A Common Stockholders | 23,645 | 37,192 | 29,775 | 48,742 | | Basic Net Income Per Share Attributable to Class A Common Stockholders | 0.33 | 0.54 | 0.38 | 0.68 | | Diluted Net Income Per Share Attributable to Class A Common Stockholders | 0.33 | 0.54 | 0.38 | 0.67 | Non-GAAP Financial Measures and Reconciliations 7.1 Explanation of Non-GAAP Measures Kinetik provides non-GAAP financial measures like Adjusted EBITDA, Distributable Cash Flow, Free Cash Flow, and Net Debt to enhance understanding of core operating performance, explaining their calculation and utility - Adjusted EBITDA is defined as Net Income (incl. non-controlling interests) adjusted for interest, taxes, depreciation and amortization, gains/losses on asset disposals and debt extinguishment, proportionate EBITDA from EMI pipelines, equity-based compensation, non-cash changes in commodity hedging activities, integration and transaction costs, and unusual or non-recurring losses and expenses[18][26] - Distributable Cash Flow is defined as Adjusted EBITDA, adjusted for proportionate EBITDA from unconsolidated affiliates, distributions from unconsolidated affiliates, interest expense (net of capitalized amounts), unrealized gains/losses on interest rate swaps, and maintenance capital expenditures[18][27] - Free Cash Flow is defined as Distributable Cash Flow, adjusted for growth capital expenditures, investments in unconsolidated affiliates, distributions from unconsolidated affiliates, cash interest, capitalized interest, realized gains/losses on interest rate swaps, and construction reimbursements[18][28] - Net Debt is defined as total short-term and long-term debt (excluding deferred financing costs, premiums, and discounts), less cash and cash equivalents[19][29] 7.2 Reconciliation Tables The company provides detailed tables reconciling GAAP financial metrics, such as net income and cash flow from operations, to non-GAAP measures like Adjusted EBITDA, Distributable Cash Flow, Free Cash Flow, and net debt Net Income (incl. non-controlling interests) to Adjusted EBITDA Reconciliation | Metric | Q2 2025 (thousand USD) | Q2 2024 (thousand USD) | H1 2025 (thousand USD) | H1 2024 (thousand USD) | | :----------------------------------- | :---------------------- | :---------------------- | :-------------------- | :-------------------- | | Net Income (incl. non-controlling interests) (GAAP) | 74,416 | 108,948 | 93,678 | 144,355 | | Add back: Interest expense | 56,514 | 54,049 | 112,228 | 101,516 | | Add back: Income tax expense | 7,327 | 9,214 | 9,894 | 13,001 | | Add back: Depreciation and amortization expense | 93,763 | 75,061 | 186,436 | 148,667 | | Add back: Proportionate EBITDA from unconsolidated affiliates | 88,100 | 85,922 | 175,630 | 174,324 | | Adjusted EBITDA (Non-GAAP) | 242,933 | 234,403 | 492,950 | 467,962 | Adjusted EBITDA to Distributable Cash Flow Reconciliation | Metric | Q2 2025 (thousand USD) | Q2 2024 (thousand USD) | H1 2025 (thousand USD) | H1 2024 (thousand USD) | | :----------------------------------- | :---------------------- | :---------------------- | :-------------------- | :-------------------- | | Adjusted EBITDA (Non-GAAP) | 242,933 | 234,403 | 492,950 | 467,962 | | Less: Proportionate EBITDA from unconsolidated affiliates | (88,100) | (85,922) | (175,630) | (174,324) | | Add back: Distributions from unconsolidated affiliates | 63,604 | 75,429 | 126,941 | 152,642 | | Less: Interest expense | (56,514) | (54,049) | (112,228) | (101,516) | | Less: Maintenance capital expenditures | (7,879) | (6,780) | (20,338) | (17,780) | | Distributable Cash Flow (Non-GAAP) | 153,303 | 162,892 | 310,284 | 317,418 | Net Debt Reconciliation | Metric | June 30, 2025 (thousand USD) | March 31, 2025 (thousand USD) | | :------------------- | :--------------------- | :--------------------- | | Short-term Debt | 189,300 | 148,800 | | Long-term Debt (net) | 3,736,972 | 3,568,457 | | Add: Debt Issuance Costs (net) | 28,028 | 26,543 | | Total Debt | 3,954,300 | 3,743,800 | | Less: Cash and Cash Equivalents | 10,733 | 8,845 | | Net Debt (Non-GAAP) | 3,943,567 | 3,734,955 |