Kinetik (US:KNTK)2020-08-01 22:57Financial Data and Key Metrics Changes - Altus Midstream reported a second quarter net income of $18 million, which included an unrealized embedded derivative loss of approximately $11 million [20] - Adjusted EBITDA for the second quarter was approximately $44 million, down about 6% from the previous quarter, despite gathering volumes declining nearly 25% [20][21] - Operating costs during the second quarter decreased by approximately 10% from the preceding quarter and 23% compared to Q4 2019 [15] Business Line Data and Key Metrics Changes - Gathering volumes averaged 434 million cubic feet per day in Q2, down 25% compared to Q1, but recovered to approximately 560 million cubic feet per day in July [14] - The Shin Oak natural gas liquids pipeline experienced reduced throughput due to low NGL prices and production curtailments, but volumes rebounded in June and July [9] - Capital investment in midstream infrastructure during the quarter was approximately $74 million, primarily for the Permian Highway pipeline [21] Market Data and Key Metrics Changes - The Permian Basin remains short of takeaway capacity for natural gas, which has led to reduced flaring of associated gas and increased demand for pipeline capacity [12] - The company anticipates gathered volumes to increase in the current quarter as curtailed production at Alpine High comes back online [20] Company Strategy and Development Direction - Altus Midstream is focused on becoming free cash flow positive in early 2021 with the startup of the Permian Highway pipeline [28] - The company is pursuing additional third-party business and reducing costs through operational efficiencies, including the shift to electric-powered compression [16][40] - The company has sold approximately $22 million worth of idle assets over the past 18 months and is looking to generate additional cash flow from underutilized assets [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the COVID-19 pandemic but expressed confidence in the company's diversified cash flow streams and healthy balance sheet [18] - The outlook for 2021 includes expected adjusted EBITDA ranging from $220 million to $260 million, representing a 40% increase compared to 2020 [27] - Management emphasized the importance of maintaining manageable leverage levels and the potential for future financing alternatives for preferred shares [31][33] Other Important Information - The company executed two deals with Apache to lease and operate underutilized compression assets, which will generate revenue in the second half of the year [18] - A reverse stock split was approved by shareholders to comply with NASDAQ minimum price listing rules [28] Q&A Session Summary Question: Dividend commencement and debt pay down priorities - Management indicated that the situation is fluid and emphasized the importance of manageable leverage levels before considering dividends [31][33] Question: Fuel switching cost benefits - Management discussed the potential benefits of fuel switching, estimating operating cost reductions between 10% to 20% with electric-powered compression, but stated that quantification will occur in future calls [35][37]