Kinetik (US:KNTK)2020-11-08 16:19Financial Data and Key Metrics Changes - Altus reported third quarter net income of $29 million, including a $4 million unrealized embedded derivative loss [16] - Adjusted EBITDA for the third quarter was approximately $53 million, a 21% increase over the previous quarter [16][19] - Year-over-year operating expenses decreased by 33%, marking the fifth consecutive quarter of reduced operating expenses [13] Business Line Data and Key Metrics Changes - Gas volumes in the gathering and processing (G&P) segment increased by 22% from the second quarter, reflecting higher system uptime and returning curtailed volumes [11] - NGL volumes on the Shin Oak pipeline remained flat compared to the prior quarter, with a modest ramp expected in 2021 [10] - The EPIC Crude Oil Pipeline continues to be affected by reduced production in the Permian Basin, with gradual volume increases anticipated as drilling activity picks up [10] Market Data and Key Metrics Changes - The Permian Highway pipeline is over 97% mechanically complete and is expected to be in service in early 2021, designed to transport up to 2.1 billion cubic feet per day of natural gas [10] - The Gulf Coast Express pipeline is performing strongly, delivering results in line with forecasts [10] Company Strategy and Development Direction - The company has shifted its focus from gas gathering and processing to long-haul joint venture pipeline projects, adapting to a changing operating environment [8] - Altus plans to initiate a substantial dividend beginning in 2021, reflecting confidence in cash flows and limited future capital needs [15][22] - The company aims to leverage its competitive position in the Permian Basin and explore growth opportunities in third-party business and M&A [30] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the outlook for the fourth quarter and 2021, citing signs of stability and progress in commodity prices and production activity [6] - The company believes it is well-positioned to capitalize on growth opportunities in the G&P sector, particularly as market conditions improve [32] Other Important Information - Altus has a manageable leverage profile and expects to maintain a debt-to-adjusted EBITDA ratio of 2 to 3x through 2022 [21][23] - The company has ample funding sources and does not anticipate needing to access capital markets for growth financing [21] Q&A Session Summary Question: Why is the dividend set at $1.50 per share? - Management explained that the $1.50 quarterly dividend is manageable based on cash generation from underlying assets, with a coverage ratio of 1.8x for distributable cash flow [29] Question: How will the dividend impact future growth opportunities? - Management indicated that while the dividend will consume a portion of free cash flow, there are still growth opportunities in the G&P business and potential third-party deals [30][32] Question: What is the cash flow stability from joint ventures? - Management confirmed confidence in cash flows from joint ventures, particularly from the Permian Highway pipeline, which is expected to provide significant stability [36][38] Question: How does the political landscape affect operations? - Management stated that the company feels insulated from political changes and believes assets will perform well regardless of the administration [40] Question: What is the status of the preferred equity and refinancing? - Management noted that there are no immediate shifts in timing for preferred equity refinancing, and the current distribution rate is manageable [45]